The Telegraph
Since 1st March, 1999
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Trai sets up monopoly hurdle

New Delhi, Aug. 29: The Telecom Regulatory Authority of India (Trai) today said there should be no cap on the number of players in a mobile circle, as part of its proposals to regulate monopolistic growth in this sector.

In mergers, the regulator said the market share of the combined entity should not be more than 40 per cent in a circle, much less than the previous norm of 67 per cent.

Cross-holding norms have been eased, with an operator allowed to take up to 20 per cent in its rival in a circle.

This comes despite lobbying by GSM operators to retain the existing cap of 10 per cent.

Trai chairman Nripen Misra, however, said permission for acquisitions beyond 10 per cent would be given on a case-by-case basis.

On provision of both GSM and CDMA services, Trai said an operator should be allowed to offer them under one licence subject to the payment of an upfront fee. This fee should be the same as the entry fee for a unified access service licence.

This augurs well for operators such as Reliance Communications and Himachal Futuristic Communications, which offer CDMA services and have applied for GSM spectrum.

Both will get the spectrum, subject to availability.

An official of Bharti Airtel, the country’s number one mobile phone company, said the easing of the norms would encourage consolidation in the sector.

Analysts said targets for takeovers were likely to be smaller players such as Spice Telecom, which operates in Punjab and Karnataka, and BPL Mobile which offers the service in Mumbai.

Likely buyers include CDMA firms, Reliance Communications and Tata Teleservices, and GSM player Idea Cellular.

The revised criterion on mergers — of market share being not more than 40 per cent — is either in terms of subscriber base or revenue.

Sudipto Bose, an analyst with a leading merchant bank, said, “This (the 40 per cent rule) clearly indicates that the telecom regulator wants M&As but will still like to protect the consumer from the ill effects of monopolies coming up, which will certainly happen if the top two or three firms merge.”

The regulator has also proposed the removal of cap on spectrum availability in case of a merged entity. However, it is opposed to such activities if the number of players in a circle is less than four.

Trai has also recommended a lower rate of universal service obligation fee if an operator covers more than 75 per cent of rural areas. “USO fee charges will come down to 3 per cent instead of 5 per cent.”

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