New Delhi, March 25: The Union Cabinet today paved the way for the consolidation of the telecom industry by abolishing a clause that disallowed the transfer of telecom licences subsequent to mergers, de-mergers and acquisitions.
The Cabinet also relaxed the lock-in period governing the equity structure of a telecom company. “A group of ministers examined the matter and granted permission for such activity but under certain conditions,” Sushma Swaraj, minister of parliamentary affairs, said after the meeting.
All the terms and conditions of the licence, including the complete rollout, obligation will apply to the transferee company irrespective of the time at which such transfer takes place and there will be no dilution in these conditions.
If there are any unfulfilled rollout obligations at the time of transfer of licence, they will devolve on the transferee company.
With regard to past dues, Swaraj said a condition has been created that liability of any past dues which are discovered at a later date will also vest with the new entity.
The transferability of licences has been a key demand of the telecom industry. “The government’s decision will simplify the process of mergers and acquisitions. It has been a long-standing demand of the industry and will help the process of consolidation in the telecom sector,” said Sunil Mittal, chairman of the Bharti Group.
Many private telecom service providers like Bharti, Reliance, and Hutchison-Essar have proposals in this regard which would now lead to a wave of restructuring of their businesses.
“We are happy to hear this. It is a welcome development. It is going to facilitate more efficient restructuring of businesses and will drive telecom growth in this country,” said T.V. Ramachandran, director-general of the Cellular Operators Association of India. “We can now hive off units which are not efficient or not compatible,” he said.
The country’s booming nine-year-old cellular sector, which has more than 11.8 million users, has attracted a host of global firms such as Singapore Telecom that has a 16 per cent stake in the country’s largest cellular services firm, Bharti Tele-Ventures.
Among the other main players in the domestic cellular market are Hutch, the domestic unit of the Hutchison Whampoa conglomerate, and Idea Cellular Ltd, partly owned by AT&T Wireless Services Inc of the US.
Swaraj said: “The new entity to whom the licence has been transferred should be eligible for grant of a fresh license for that particular service.”
She also said all outstanding dues to the government needs to be settled before transfer of license is allowed. “The transferee will, however, be liable for the dues arising after the date of transfer,” she said.