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News Heading  : DoT rejects Trai's proposals for liberal M&A norms; to impose fee on GSM operators on 'excess' spect

Post Date : 2011-11-23

News Source : The Economic Times

News By : Joji Thomas Philip

News Details  :

The telecom department has rejected Trai's proposal for liberal M&A rules to make consolidation easier in the 14-player ultra-competitive market. It has accepted the regulator's proposal to impose a one-time fee on incumbent GSM operators on all their 'excess' spectrum, a move that will force operators' to shell out over 17,500 crore. The department has suggested that companies share 8% of their annual revenues with the government, despite Trai reiterating that this be reduced to 6%, bringing savings to the industry.

The Telecom Commission, the apex decision-making body of the communication ministry, and minister Kapil Sibal, must approve the department's decisions before it becomes part of policy. The Telecom Commission will meet on November 28, and experts warn that approval of the department's decisions could indefinitely delay recovery of India's beleaguered telecom industry that is fighting falling profits and revenues.

Earlier this month, Trai recommended that mobile phone companies could merge their operations if the combined market share of the new entity is less than 60%, a substantial increase over the current 40% ceiling. But the telcom department panel examining Trai's recommendations has said that this could lead to a 'monopoly market situation' and has further suggested that the market share ceiling of the combined entity be reduced to 35%.

The combined revenue market share of India's largest operators - Bharti Airtel and Vodafone India - is 51% and theoretically Trai's proposals would have allowed any operator in the country to buy out any other telco. It would have also allowed large telcos to buy out multiple smaller operators and new entrants, reducing the total number of players in the fray.




Trai further proposed that in the case of M&As, there should be no spectrum caps and the combined entity be allowed to hold up to 25% of the total available airwaves in that region. Current rules allow the merged entity could retain only 14.4 MHz or units of second generation spectrum, where they have to return the remaining amount to the government, but the regulator's recommendations were aimed at allowing the combined entity to retain about 17-18 MHz in every region.

But the telecom department panel wants spectrum holdings further tightened and pointed that Trai in the past had said that 8-10 MHz or units of 2G airwaves were sufficient for an operator, while also adding that the 'nation required an uniform regulatory approach for entitlement of spectrum irrespective of whether the company obtained it by itself or through mergers'.

 
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