Panel gives nod to rules on telecom mergers and acquisitions: report
The Empowered Group of Ministers, headed by Finance Minister P Chidambaram, on Tuesday approved the much-awaited guidelines on telecom mergers and acquisitions (M&As) and decided on the quantum of 2G spectrum to be auctioned in January 2014, according to sources.
In a merger, the resultant entity has to pay market rates for holding spectrum above 4.4 MHz allotted to the companies administratively at old rates.
If two merging entities hold airwaves purchased through auctions, they are not required to pay market rate for spectrum, the sources said, adding that it has also been decided to put a cap on spectrum a final entity can hold in an area.
However, the merging companies will have to comply with the lock-in clause for sale of equity.
The telecom sector's first M&A rules pave way for consolidation in the Indian telecom market where there are about 12 players including Bharti Airtel, Vodafone, BSNL, Tata Teleservices, Videocon and Aircel.
"The M&A guidelines have been finalised and the quantum of spectrum that will be put up for auction in the 2G band has also been finalised," Telecom Minister Kapil Sibal said after the meeting.
According to sources, the EGoM has approved sale of 403.2 Megahertz of 2G spectrum in 1800 Mhz frequency band, which at the base price finalised by the ministerial panel amounts to about Rs 36,385 crore.
The EGoM in its last meeting had also approved sale of premium spectrum in 900 Mhz band in three metros - Delhi, Mumbai and Kolkata - held by licences of Airtel, Vodafone and Loop Mobile that are due to expire in last quarter of 2014.
The total quantum of spectrum getting freed in the three metros is about 46 Mhz, which amounts to about Rs 12,300 crore at the base rate finalised by the EGoM in its last meeting.
Together, the 900 Mhz and 1800 Mhz band airwaves are valued at about Rs 48,685 crore.
The government in the Budget has provisioned about Rs 41,000 crore from spectrum revenue, which included upfront money from auction and various fees levied on airwaves used for commercial mobile communications.
On M&A rules, according to government sources, the EGoM will send its recommendations to Cabinet for final approval.
The EGoM may seek legal opinion on whether entities who have acquired spectrum recently can participate in M&A process within the lock-in period, they added.
During the lock-in period, a telecom operator is barred from selling equity of a person who holds 10 per cent or more in the company till completion of 3 years from the date of allotment of spectrum, or till fulfillment of all the network roll-out obligations whichever is later.
"A legal view will be taken whether entering into an M&A will lead to violation of the lock-in period clause," another government source said.
The source also said that even in case a company acquires a dual technology player, the resultant entity will have to pay market-determined price for all spectrum held beyond 4.4 Mhz, if the spectrum is not liberalised i.e. not bought in auctions.
The government has given companies, who were allocated spectrum at the 2001 rate of Rs 1,651 crore for pan-India spectrum, the option to get their airwaves liberalised by paying one-time spectrum fee. However, most of the players have challenged the government's decision to impose such a one-time fee in courts.
