governing telecom service providers.
It has said that the combined market power of the merged entity
should not be more than 40 per cent. This is considerably lower than
the present definition of dominant market share, which is pegged at 67
per cent.
If this proposal is accepted, then any two large operators such as
Bharti Airtel and Vodafone Essar may not be able to merge as both have
more than 20 per cent market share each in some of the circles such as
Delhi. It has also said that a minimum of four operators should be
left per circle post any merger. At present, a minimum of only three
operators per circle is required. .
While the new guidelines are broadly in line with the recommendations
made by the telecom regulator, DoT has not agreed to a proposal to
increase the existing cap of 10 per cent on equity that one telecom
player can acquire in another operator in the same service area. DoT
has retained the clause whereby a single entity cannot own more than
10 per cent stake in two different telecom companies in the same
circle.
3-month deadline
DoT has made it mandatory for the merged entity to meet the subscriber
linked criteria for spectrum within 3 months of the deal. If the
combined spectrum is in excess of the prescribed subscriber-linked
criteria, then the operator will have to surrender the excess radio
frequency.
The new norms also put a 3-year lock-in period on new operators. Any
permission for merger shall be accorded only after the completion of 3
years from the effective date of the licences. However, DoT has not
spelt out whether it will allow the new licence holders to sell equity
to another company before the 3-year period. This will have a bearing
on a number of global players such as AT&T and Sistema who are looking
at acquisitions in the Indian telecom space.
Reacting to the policy, T. V. Ramachandran, Director General, Cellular
Operators Association said, "At a time when everyone is talking about
consolidation in the telecom industry, DoT has tightened the norms.
This will discourage consolidation which, in the long term, is not
good for the sector."
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