New Delhi, Sept. 29: Foreign telecom players are waiting for the new merger and acquisition norms, expected to be announced by mid-October, before committing fresh investments.
According to telecom ministry officials, Sistema, SingTel, Vodafone and Telenor are believed to be holding on to further investments till the policy is unveiled. SingTel holds 32 per cent in India’s No. 1 telecom player Bharti Airtel.
The M&A norms will allow firms to merge or buy out smaller players, provided the combined market share of the merged entity does not exceed 60 per cent in a circle.
Further, companies cannot cross the cap on the spectrum held in a service area. This cap has been kept at 25 per cent for GSM and 10MHz for CDMA spectrum.
The government has already recommended 100 per cent foreign direct investment in telecom against an earlier limit of 74 per cent.
It has also taken on board Trai’s recommendation that by paying a fee, telecom companies can buy or rent spectrum from another, subject to a cap of 50 per cent of the spectrum in a band, and 25 per cent of the total commercial spectrum assigned in a service area.
Sources said Tata Tele, Sistema and Aircel had kicked off merger talks, whose outcome would depend on the new norms. If the talks are successful, the merged entity could hold about 16 per cent market share.
Bharti Airtel, the biggest player, has a 22 per cent share in domestic telecom, while Vodafone holds around 18 per cent.
The local arm of Russia’s Sistema won back spectrum in eight circles through an auction in March. Its licences were revoked by the Supreme Court in February 2012.
Sistema Shyam Teleservices Ltd, the sole participant in the auction, put in a bid of Rs 3,639 crore. However, the company will not have to pay till March 2016.
Rules require the winning bidder to pay around 25 per cent of the bid amount upfront. However, in Sistema’s case, the initial payment will be adjusted against the amount it had paid earlier for the licences in 22 circles that were scrapped by the apex court.
Sistema’s victory and the rules that allow the company to pay nothing now will help India to calm down Russia, which was angry at the treatment meted out to the telecom company.
The Russian government owns 17.14 per cent in Sistema-Shyam, while 56.68 per cent are held by Sistema and the rest by India’s Shyam Group.
SingTel has made it clear that it will fund any merger and acquisition to help consolidate Bharti’s hold in the market after the new norms are unveiled.
Bharti, which has been on an overseas acquisition spree in countries such as Africa and Bangladesh, may need additional funds to buy fresh spectrum that may be put up for auction.
Vodafone, which has a small equity investment in Bharti Airtel, has described itself as a “natural consolidator” in India.
The British telecom giant will have at its disposal $130 billion it is receiving from Verizon to buy out its stake in its US business and this is expected to be partially used to help it grow organically and inorganically in fast growing markets such as India.