Telecom Commission Okays M&A Rules

The Telecom Commission has not ruled out levying a one-time fee on operators holding spectrum beyond 6.2 mega hertz and favours an auction-based pricing for future spectrum allocations, the telecoms secretary said on Monday.

R. Chandrashekhar, the top bureaucrat in the telecoms ministry, also said the commission had accepted the sector regulator Telecom Regulatory Authority of India's proposals on mergers and acquisitions rules by and large.

India's once-booming telecom sector has struggled in recent years from competition and a scandal over alleged below-market price sale of spectrum, prompting authorities to overhaul decades-old regulations.

"We will be furnishing our recommendations to the government now and after that those items, which need cabinet approval, will go to cabinet," Chandrashekhar told reporters after a meeting of the commission, the highest decision making body within the telecoms ministry.

He did not give details on the spectrum proposals except to say that "For the future allotments, we are looking more closely at auction-related pricing."

The TRAI had earlier proposed steep increases in spectrum prices and a one-time fee on spectrum beyond 6.2 mega hertz, which would see bigger carriers like Bharti Airtel (BRTI.NS) and Vodafone's (VOD.L) India unit pay hundreds of millions of dollars each.

M&A Rules

Analysts say current mergers and acquisitions rules are restrictive. India's telecoms ministry has said it will relax rules to facilitate a sector consolidation as part of a new telecoms policy, likely to be approved by June.

Last month, the sector regulator proposed a relaxation of rules for M&A in the telecoms sector in a move to facilitate a long-awaited consolidation in the 15-player market.

On mergers and acquisitions, "we have by and large accepted the TRAI's recommendations," Chandrashekhar said.

The TRAI had proposed that companies should be allowed to merge if their combined subscriber or revenue market share does not exceed 60 per cent, although its consent would be required for any merger that would create a company with a market share of between 35 and 60 per cent.

Chandrashekhar said those mergers where the combined entity's market share does not exceed 35 per cent and the spectrum holding is up to a quarter of the total spectrum available in a telecoms zone will be "cleared".

"And above that, we will be requesting the TRAI to suggest some guidelines considering specific cases where the market share may be above 35 per cent," Chandrashekhar said.

Under current rules, two companies can merge only if their combined market share does not exceed 40 per cent.

The commission has also decided to fix license fee for operators at an uniform 8 per cent of their revenue, from a variable fee of 6 to 10 per cent currently, Chandrashekhar said, adding the new fee would be implemented in two phases.

The commission has also "by and large" accepted the regulators proposal to allow firms to share radio spectrum, Chandrashekhar said.