The department of telecommunications (DoT) will retain the power to regulate mergers and acquisitions in the mobile telephony segment despite agreeing to increase the cap on the combined marketshare of merged entities to 60% from the current 40%.
The telecom commission, the highest policy-making body in the DoT, is scheduled to meet on December 26 and clear the recommendation of the Telecom Regulatory Authority of India (Trai) to increase the cap.
However, the members of the commission, which apart from the DoT secretary includes the secretaries of finance, Planning Commission and department of industrial planning and promotion, are of the view that the powers to regulate such M&As should be retained by the DoT and not handed over to Trai.
The regulator had recommended that if the combined marketshare of the merged entities is up to 35% after any M&A, it should be treated as an automatic merger. However, if it is beyond 35% and up to the permissible 60%, the entity should first seek approval from Trai.
However, officials said that the telecom commission members are of the view that though the cap should be increased, the powers to vet M&As beyond 35% and up to 60% should vest with the DoT. ?We have decided to ask the Trai to formulate the guidelines which should serve as a check while vetting such proposals, but the power to do so would remain with the DoT and not be given to Trai,? an official said.
The decision to increase the cap on the combined marketshare of merged entities is expected to bring about significant consolidation in the crowded telecom market where each circle has about 12-14 players.
The move would also encourage mergers between two big players like Bharti and Vodafone, which currently is not possible with the 40% cap.
The telecom commission is also expected to clear the proposal that any merged entity can hold 25% of the total spectrum assigned in a given circle. Currently the cap is 15 Mhz. This acts as a stumbling block and checks M&As between two big companies because any spectrum held beyond 15 Mhz needs to be surrendered.
As earlier reported by FE, on another crucial issue of pricing 2G spectrum, the telecom commission?s view is to hold auctions and discover price rather than go by the administered price recommended by the Trai. However, at the insistence of the finance ministry the one-time fee on operators holding excess spectrum (beyond 6.2 Mhz) like Bharti, Vodafone and Idea Cellular is likely to be on a retrospective basis, ie the date on which the spectrum was allocated to them around 2003-04 rather than on a prospective basis, which means the remaining tenure of their licences.
Whatever is the price discovered through auctions would also apply to the new operators given licences in 2008 who currently have 4.4 Mhz spectrum and are seeking additional 1.8 Mhz.