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Easier norms likely for telecom Mergers and acquisitions
November, 01st 2013

In a bid to spur consolidation in the domestic telecom market, the department of telecommunications (DoT) appears set to allow a market share of up to 50% in case of merger and acquisitions, raising the bar from 35% proposed earlier. The DoT is also backing a major industry demand by allowing a merged entity to hold two blocks of 3G spectrum, thus doing away with the need to surrender the lucrative airwaves post-merger.

According to sources, the final draft on telecom M&As has decided to be liberal on the market share norms against the earlier stand of 35%, which was proposed to prevent monopoly in the sector.

The proposal, if finally cleared, will benefit larger telecom companies such as Bharti Airtel, Vodafone and Idea, which may not have to worry about market share caps in case of a merger, the sources said. Telecom regulator Trai had also proposed an even higher 60% market share in its recommendations made in November 2011.

Of the 679 million GSM subscribers, Bharti Airtel has a market share of 28%, while Vodafone has 23% and Idea 19%, as per latest figures released by industry body COAI. The relaxation on 3G spectrum is also seen to be crucial as earlier a company was not allowed to hold two blocks in the same circle. "There will be no need to surrender the spectrum as per the final draft," a source said.

The new draft also extends another benefit to the industry by saying that dues pending on merging companies may not have to be cleared if the matter is pending in court.

This means if a company has moved court against penalties slapped on it by DoT, it may not need to clear them before a merger.

The new M&A guidelines are expected to be announced soon, telecom minister Kapil Sibal said last week. The government is considering a spate of positive measures before the next round of spectrum auctions (expected in January) as it wants an enthusiastic participation against the lukewarm response in November last year and March this year. Among the many measures that are being worked out by the government are lower reserve price for spectrum (as proposed by Trai), a nod to spectrum trading and sharing, and graded penalties.

 
 
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