Path paved for telecom M&As

NEW DELHI: The Telecom Regulatory Authority of India (Trai) has said there will be no cap on the number of operators in a telecom circle.

(DNA Money broke this story way back on July 31. On August 15, we also said how new regulations will benefit Reliance Communications.)

Trai has also increased the cross-holding limit from 10 to 20% in case of a merger, thereby encouraging the sector to grow even further.

Also, it has favoured access providers using a combination of technologies, though at a price.

This is a move that can help CDMA player Reliance Communications expand its GSM services nationwide.

In its voluminous recommendations issued on Wednesday on the licensing and M&A policy in the telecom sector, the regulator has said that "no cap be placed on the number of access service providers in any service area", but it has lowered the limit of market share of merged entity from 67 to 40%.  

Trai  has also imposed a one-time fee for spectrum allocation beyond 10 mega hertz. Also, looking at the current spectrum constraint, it has enhanced the present subscriber norms. That is, if now, a GSM operator requires 2.1 million subscribers for allocation of 15 mega hertz of spectrum in Mumbai and Delhi, the Trai recommendation states that the subscriber number should be at least 5 million for the same quantum of spectrum in these cities. Similarly for CDMA, the subscriber criteria has been raised from 2.1 million to 5 million for 7.5 mhz of spectrum in Mumbai and Delhi.

Roll-out obligations must be fulfilled by operators before additional spectrum beyond 4.4 mhz is given to GSM players and 2.5 mhz to CDMA service providers. Another Trai proposal that has upset many GSM operators is that any 2G licensee seeking additional spectrum beyond 10 mhz must pay a one-time spectrum charge.

The proposed onetime fee is Rs 80 crore for an additional 5 mhz spectrum in Mumbai, Delhi and A cetegory circles, Rs 40 crore for Chennai, Kolkata and B circle categories, and Rs 15 crore for category C circles. In addition, the annual revenue-sharing fee linked to spectrum usage has been hiked by 1 per cent for 10 mhz and above. So, the maximum revenue-share fee has been increased to 8% from the current 6.

The regulator has suggested formation of an expert committee for a new spectrum allocation policy. For merger, Trai has relaxed the conditions in some cases while tightening them elsewhere. For instance, the existing cap of 15 mega hertz per service area for metros and category A, and 12.4 mhz for the other circles, for a post-merger entity has been recommended for removal. Trai has also said that acquisition of equity capital up to 10% of the target licensee's enterprise shall be permitted by an automatic route and anything beyond that and up to 20% of the equity holdings of the target licensee company shall be approved on a case by case basis.

In case of merger, annual spectrum charge will be at the prescribed rate applicable on the total spectrum held by them. But, to assess market power of a merged entity, both subscriber base and revenue of a licensee would be considered. Currently, only the subscriber base is taken into account.

In yet another revision, Trai has said the market share of a merged entity in a relevant market must not exceed 40%. Currently, it's 67%. No M&A activity would be allowed if the number of players is less than four in a circle. On cross-technology, Trai has said that an existing licensee may be permitted to use alternate technology to provide wireless access service, on payment of an upfront fee at least equal to the entry fee for an UAS licence in that service area.