TRAI floats new M&A policy norms
04-11-2011
Liberalises the amount of spectrum a merged entity can retain
Mergers of telecom operators with a combined market share or adjusted gross revenue of less than 35% in a circle should be permitted, according to new recommendations by Telecom Regulatory Authority of India (TRAI). If the combined market share is between 35% and 60%, the government could consider allowing a merger on a case-by-case basis.
In no circumstances should mergers be allowed if the combined market share is found to exceed 60 per cent, according to TRAI.
The move is expected to encourage consolidation in the telecom industry, where there are upto 12 players in each circle. Many small operators are in financial difficulties, and in some cases their shareholders are bent on quitting
Some of the half a dozen-odd new operators given licences in 2008 would get a window of opportunity to exit their loss-making businesses. Telcos such as STel, Videocon, Sistema Shyam (MTS), Unitech Wireless (Uninor), Loop and Etisalat DB account for only 6.38 per cent of the telecom market. Some of them have asked the government for an exit policy, the norms for which would be determined by Trai.
Under the new recommendations, in the Delhi circle it would theoretically be possible for Airtel to merge with Aircel or Idea Cellular, and be considered for a merger with Vodafone. Airtel has 20.51 per cent market share based on Trai data of August 2011, Aircel has 5.40 per cent, Idea Cellular 10.4 per cent and Vodafone 19.7 per cent.
Earlier Trai recommendations, which the department of telecommunications asked it to reconsider, said mergers of entities with a combined share of up to 30 per cent should be allowed. That would have meant a hypothetical Airtel-Idea Cellular or a Airtel-Vodafone merger would not be permitted in Delhi. Currently, mergers are permitted provided the joint market share is not more than 40 per cent and there is a three-year lock-in period.
The new recommendations would also significantly liberalise the amount of spectrum the merged entity can retain: up to 25 per cent of the total spectrum available with all the operators in the circle. Earlier, the merged entity could retain only 14.4 MHz and had to return the rest to the government. In the new plan, the merged operator can retain 16-17 MHz, according to Trai officials? calculations of spectrum availability in various circles.
Ernst & Young telecom industry leader Prashant Singhal said, "This will put consolidation on a fast track, after which three-five players will have enough competition. That the combined entity can retain 25 per cent of the total spectrum is also a step forward in this direction". The GSM industry lobby, Cellular Operators' Association of India director general, Rajan Mathews, said, "The new merger norms will give enough flexibility to operators. It will be very effective, practical and conducive for the operators in this scenario"
Trai has also recommended the government explore the freeing of spectrum usage linked to a specified service. Trai officials say, for instance, users of 1,800 MHz, who currently have to use it to provide only 2G services, can also use it for 3G services. However, the process would entail substantial re-pricing of spectrum to ensure a level playing field for operators. The regulator will release a consultation paper to deal with this issue.
It has reiterated the stand that operators with excess spectrum beyond 6.2 MHz must pay for it based on current prices, determined by a committee.
The stand has been criticised by existing players such as Bharti Airtel, Vodafone Essar and Idea Cellular, among others, who will have to fork out nearly Rs 17,000 crore to hold spectrum beyond 6.2 MHz if the recommendation is implemented. The COAI has opposed the move.
Trai has suggested permitting spectrum sharing, but with stiff riders. Sharing would be permitted only between two spectrum holders, so an operator with a UASL licence without spectrum cannot share with a licensee who has spectrum. Sharing would be for five years and could be renewed. The total spectrum shared should not exceed the limit prescribed for mergers. In a clear move to steer clear of the 3G controversy around operators offering services through roaming pacts, Trai has clarified that spectrum obtained through auction can be shared only if the auction conditions provide for it.
From Business Standard
Mergers of telecom operators with a combined market share or adjusted gross revenue of less than 35% in a circle should be permitted, according to new recommendations by Telecom Regulatory Authority of India (TRAI). If the combined market share is between 35% and 60%, the government could consider allowing a merger on a case-by-case basis.
In no circumstances should mergers be allowed if the combined market share is found to exceed 60 per cent, according to TRAI.
The move is expected to encourage consolidation in the telecom industry, where there are upto 12 players in each circle. Many small operators are in financial difficulties, and in some cases their shareholders are bent on quitting
Some of the half a dozen-odd new operators given licences in 2008 would get a window of opportunity to exit their loss-making businesses. Telcos such as STel, Videocon, Sistema Shyam (MTS), Unitech Wireless (Uninor), Loop and Etisalat DB account for only 6.38 per cent of the telecom market. Some of them have asked the government for an exit policy, the norms for which would be determined by Trai.
Under the new recommendations, in the Delhi circle it would theoretically be possible for Airtel to merge with Aircel or Idea Cellular, and be considered for a merger with Vodafone. Airtel has 20.51 per cent market share based on Trai data of August 2011, Aircel has 5.40 per cent, Idea Cellular 10.4 per cent and Vodafone 19.7 per cent.
Earlier Trai recommendations, which the department of telecommunications asked it to reconsider, said mergers of entities with a combined share of up to 30 per cent should be allowed. That would have meant a hypothetical Airtel-Idea Cellular or a Airtel-Vodafone merger would not be permitted in Delhi. Currently, mergers are permitted provided the joint market share is not more than 40 per cent and there is a three-year lock-in period.
The new recommendations would also significantly liberalise the amount of spectrum the merged entity can retain: up to 25 per cent of the total spectrum available with all the operators in the circle. Earlier, the merged entity could retain only 14.4 MHz and had to return the rest to the government. In the new plan, the merged operator can retain 16-17 MHz, according to Trai officials? calculations of spectrum availability in various circles.
Ernst & Young telecom industry leader Prashant Singhal said, "This will put consolidation on a fast track, after which three-five players will have enough competition. That the combined entity can retain 25 per cent of the total spectrum is also a step forward in this direction". The GSM industry lobby, Cellular Operators' Association of India director general, Rajan Mathews, said, "The new merger norms will give enough flexibility to operators. It will be very effective, practical and conducive for the operators in this scenario"
Trai has also recommended the government explore the freeing of spectrum usage linked to a specified service. Trai officials say, for instance, users of 1,800 MHz, who currently have to use it to provide only 2G services, can also use it for 3G services. However, the process would entail substantial re-pricing of spectrum to ensure a level playing field for operators. The regulator will release a consultation paper to deal with this issue.
It has reiterated the stand that operators with excess spectrum beyond 6.2 MHz must pay for it based on current prices, determined by a committee.
The stand has been criticised by existing players such as Bharti Airtel, Vodafone Essar and Idea Cellular, among others, who will have to fork out nearly Rs 17,000 crore to hold spectrum beyond 6.2 MHz if the recommendation is implemented. The COAI has opposed the move.
Trai has suggested permitting spectrum sharing, but with stiff riders. Sharing would be permitted only between two spectrum holders, so an operator with a UASL licence without spectrum cannot share with a licensee who has spectrum. Sharing would be for five years and could be renewed. The total spectrum shared should not exceed the limit prescribed for mergers. In a clear move to steer clear of the 3G controversy around operators offering services through roaming pacts, Trai has clarified that spectrum obtained through auction can be shared only if the auction conditions provide for it.
From Business Standard
