Friday, November 4, 2011

Double treat for telecom

http://www.telegraphindia.com/1111104/jsp/business/story_14706769.jsp
Double treat for telecom

New Delhi, Nov. 3: The telecom regulator today recommended an up to 35 per cent market share as safe for mergers and acquisitions, while allowing spectrum sharing between all mobile operators.

"Keeping in view the current context and the international practice as well as the provisions of the Competition Act, the authority recommends that up to the level of 35 per cent market share (calculated using subscriber numbers or annual gross revenue), for the resultant entity... as the green line or safe harbour," Trai said.

The regulator has also proposed spectrum sharing between all mobile operators in its final recommendations to the department of telecom (DoT).

Earlier, the regulator and the DoT had questioned mobile operators providing high-speed 3G services through spectrum sharing agreements, terming it illegal and in violation of telecom rules.

Merger norms

Trai's latest merger norms state that the government should give automatic approval if the combined market share of the merged entities was up to 35 per cent.

"Those falling above 35 per cent and up to 60 per cent (market share of resultant entity) would be referred to Trai for its recommendation, which would carry out a detailed examination to ensure that there would not be any abuse of market dominance," the regulator said.

Cases where the resultant entity would have more than 60 per cent market share would "not be considered at all", as these would fall beyond the "Red Line", it said.

Under the current M&A rules issued in April 2008, the combined market share of the merged entity is capped at 40 per cent.

Trai has also proposed that the merged entity can keep only a fourth of the combined spectrum of the partnership.

The excess radio waves need to be surrendered to the government within a year of the permission being granted. So even if a firm has a 60 per cent market share, it can service that only with 25 per cent of spectrum.

The proposals will now be considered by the Telecom Commission, the highest decision making body of the DoT, before it is made into policy.

Spectrum sharing

Spectrum sharing will allow mobile service providers with excess radio waves to lease it to other operators on commercial terms, without the government having to dole out fresh spectrum.

The move will allow new operators such as Uninor to provide services in lucrative circles such as Delhi, where it did not get spectrum. At the same time, it will open up new revenue streams for old operators such as Bharti Airtel or Vodafone, which can lease out the radio waves.

Spectrum sharing would be allowed up to a period of five years and subject to renewal, for another five years.

"Spectrum sharing would help operators who face shortage of radio waves to decongest their networks. This will also lead to reduction in capital outlays for operators, which may in turn result in lower tariffs for consumers," said Hemant Joshi, partner of Deloitte Haskins & Sells.

The DoT had asked the telecom regulator to provide its recommendations on spectrum allocation and pricing, which are essential in finalising the National Telecom Policy 2011 to be implemented by end of this year.

One-time fee

Trai has retained its position on a one-time fee payable by operators for holding spectrum beyond the contracted amount.

"The regulator has stated that up to 6.2 Mhz for GSM operators and 5 Mhz for CDMA players is the contractual spectrum," said sources.

Every Mhz of additional spectrum beyond the contracted limit would cost between Rs 50 crore and Rs 450 crore (for different circles).

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