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Help Telecom panel wants TRAI to review M&A proposals
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#1
The Telecom Commission has asked the telecom regulator to reviews its recommendations on merger & acquisition, especially those linked to the total spectrum that can be held by the merged entity.

The Commission has asked as to why TRAI has allowed a merged entity to hold maximum spectrum of 14.4 Mhz when it has suggested a cap of 10 Mhz for stand-alone operators.

“TRAI may indicate the rationale for the wide variation between the limit of spectrum that can be acquired through M&A and by regular procedure. In case a variation is considered necessary for practical reasons, it may be indicated whether the higher limit for M&A is for the entire licence period,” the Telecom Commission observed in its meeting on August 10.

The proposed M&A rules are crucial as currently there are 10-12 operators. Market analysts have said that ideally this number should be brought down to 6-7.

TRAI has also been asked to determine the maximum spectrum to be allowed in case the merged entities hold both GSM and CDMA spectrum.

“There may be possibility that either or both parties may have 3G/BWA spectrum. It may be examined by TRAI whether the modalities of merger of such entities will be different from those recommended in May 2010. The principles governing holding of spectrum in each of the technologies, post merger, may be recommended by TRAI,” an internal DoT note said.

The panel has asked the regulator to justify imposition of spectrum transfer charge of 5 per cent of the difference between the transaction value and the cost of spectrum the operators paid.

It has also sought clarification on why TRAI has suggested a five-year ban on diluting equity stake when the entire purpose of the new rules was to enable M&A.

“TRAI may indicate the rationale on sharing spectrum for a maximum period of five years only. TRAI may also examine this aspect keeping in view the saving of scarce resources, impact on quality of service, consumer satisfaction and share its analysis of the pros and cons of implementing a policy that allows spectrum sharing,” the note said.

The Commission has also agreed to seek TRAI's views on giving an exit route to companies that do not want to continue in the business.

Call for clarity

# Why allow
a merged entity to hold maximum spectrum of 14.4 Mhz, given a cap of 10 Mhz for stand-alone operators?

# TRAI to
determine maximum spectrum in case merged entities hold both GSM and CDMA spectrum.


Source: Business Line

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