New Delhi, Dec. 3: An empowered group of ministers on telecom, headed by finance minister P. Chidambaram, today approved the much-awaited guidelines on telecom mergers and decided on the amount of 2G spectrum for auctions in January.
In a merger, the resultant entity has to pay market rates for holding spectrum above 4.4 MHz that was allotted to the companies administratively at old rates.
If two entities, which are merging, hold airwaves purchased through auctions, they will not have to pay market rate for spectrum, sources said, adding that it has also been decided to put a cap on spectrum a final entity can hold in an area.
After merger, the new company should not hold more than 50 per cent of the spectrum in a given band and would have to give up the excess holding if it does.
The merging companies will have to comply with the lock-in clause for the sale of equity.
The department of telecom (DoT) had in a note asked the government to allow merger without any lock-in periods.
At present, firms have a three-year lock-in period within which they cannot transfer their licences. This clause was inserted to prevent excessive profiteering through speculative trade in licences. However, this clause loses its relevance with auctions.
Many argue that the clause needs to be reversed to allow a telecom player to sell out, cut losses if it has got spectrum through auction.
The government is likely to seek a legal opinion.
The M&A rules will pave the way for a consolidation in the Indian telecom market where there are about 12 players, including Bharti Airtel, Vodafone, BSNL, Tata Teleservices, Videocon and Aircel.
“The M&A guidelines have been finalised and the quantum of spectrum that will be put up for auction in the 2G band has also been finalised,” telecom minister Kapil Sibal said after the meeting.
In case the firms are operating on 3G airwaves, they will be allowed to hold two slots after merger. Earlier rules allowed even merged entities to hold only one slot of 5 MHz of 3G spectrum and required surrendering extra slots.
According to sources, the EGoM has approved the sale of 403.2 MHz of 2G spectrum in the 1800 MHz frequency band, which at the base price finalised by the ministerial panel, amounts to about Rs 36,385 crore.
The EGoM in its last meeting had also approved the sale of premium spectrum in 900 MHz band in three metros — Delhi, Mumbai and Calcutta held by Airtel, Vodafone and Loop Mobile through licences that are due to expire in the last quarter of 2014.
The total amount of spectrum getting freed in the three metros is about 46 MHz, which amounts to about Rs 12,300 crore at the base rate finalised by the EGoM in its last meeting.
Together, the 900 MHz and 1800 MHz band airwaves are valued at about Rs 48,685 crore.
The Centre in this year’s budget has provisioned about Rs 41,000 crore from spectrum revenue, which included upfront money from auction and various fees levied on airwaves used for commercial mobile communications.
Mohammad Chowdhury, leader telecom at PwC India, said: “The M&A guidelines are a step in the right direction with respect to market share allowances, but the requirement for additional spectrum payouts to the government could be a serious dampener.”
“These guidelines provide an exit route to companies who procured 3G/4G spectrum in 2010 but have not rolled out networks yet... genuine operator level consolidation across the industry will take some time,” Chowdhury added.
Meanwhile, following complaints against auto-renewal of special offers by telecom service providers, Trai today directed operators to seek consent from subscribers before renewing special tariff vouchers for SMS and data packs.
The Telecom Regulatory Authority of India (Trai) said consumers were seldom aware of auto-renewal of such offers.