The Telegraph
Since 1st March, 1999
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Govt rings telecom consolidation bell

New Delhi, June 6: The Union communications ministry has finally come out with the notification that allows private telecom operators — both basic and cellular players — to consolidate their operations through mergers and demergers that involves splitting up their licences circle-wise.

The notification, which puts the official seal on decisions in this regard that were taken by the Union Cabinet back in March, however, comes with a rider: no company will be allowed to create a monopoly by snapping up its rival’s licence in the same circle.

The rider scuppers plans of some telecom companies which were thinking of consolidating operations by buying out their rivals — especially in the small and less lucrative circles. This was one of the major demands made by companies like Bharti which offers mobile services in 15 out of 22 circles in the country.

Senior communications ministry officials said the notification sent last week also incorporated a few clauses to maintain competitiveness in the telecom sector and pre-empt the creation of a monopoly in the market.

“While the operators can merge and demerge, the department of telecommunication (DoT) has prohibited acquisition within the same service area (intra-circle) by amending a clause relating to transfer of licence. This will prohibit a licensee in a circle from acquiring another licence in the same circle,” sources said.

Sources said the other concern was spectrum allocation which is limited. The cellular players in the large circles almost use the entire spectrum band to provide their value-added services and could see an acquisition of a smaller rival — there are four operators allowed per circle — to increase the spectrum at their command. The decision to prohibit intra-circle licence buyouts is also designed to pre-empt spectrum bundling by the dominant player in the market.

“Further all incomplete obligations like roll-out of village public telephones would also be transferred to the new licensee. This will also act as a deterrent,” sources added.

In March, the group of ministers on telecommunication and later the Union Cabinet had approved the proposal to amend the licence to allow merger, de-merger and acquisition of telecom companies.

Under the licences issued to the cellular mobile telephone service and basic telephone service issued in 1994, the companies were barred from assigning the licence or transferring it. The companies with the licences were barred from creating any third party right in any manner whatsoever.

A five-year lock-in period was also prescribed during which the equity structure of the licensee company was not permitted to be changed.

Bharti Group was the first company to approach the DoT seeking to merge its four cellular companies operating in India under Bharti Cellular Ltd, less than a fortnight after the government cleared the transfer of licence for mergers and de-mergers.

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