labels: telecom, telecom regulatory authority of india, m&a
TRAI doubles operator cross-holdings to 20-per cent for telecom M&As news
30 August 2007

The Telecom Regulatory authority of India (TRAI) has come out with M&A guidelines. It has increased operator cross-holdings to 20 per cent from 10 per cent and has made recommendations on spectrum charges.

According to TRAI''s recommendations, the ceiling on the number of licenses or operators in a circle is unlikely though the pan India service providers and GSM operators may be in for negative news. Reliance Communications, on the other hand is a likely beneficiary as TRAI has allowed operators to operate in multiple service technologies.

TRAI has also made it clear that the dominance of market players should not be more than 40 per cent if a merger takes place, which gives a clear indication that the telecom regulator does not want leading service providers to merge.

It also means that smaller operators like Spice, Idea and Aircel will become the M&A targets for the bigger players.

TRAI has also said that no M&As will take place in circles, which have less than four operators.

The M&A dominance criteria will now be based on subscribers and AGR. The 15 Mhz ceiling has also been removed in case of M&As.

If telecom companies provide coverage to 80 per cent of rural area their universal service obligation charges will come down to 3 per cent instead of 5 per cent.

The termination of license clause for roll-out obligation is unnecessary now.

And, though TRAI''s recommendation on raising the cross-holding limit comes as positive news for an industry looking at a consolidation, the regulator has also raised the price of spectrum for GSM operators in the country.

The spectrum charge for beyond 8 MHz has been raised by 1 per cent and operators going beyond 10 MHz need to pay a one-time charge of Rs16 crore.

As a result, the cost to the industry is likely to go up because in most of the metros this spectrum is already above that level.

Though thee Cellular Operators Association of India has welcomed the removal of the ceiling on spectrum, it has deplored the "double-whammy" that the one-time charge of Rs16 crore in addition to raising of the price of spectrum by 1 per cent for GSM operators.

T V Ramachandra, director general, Cellular Operators Association of India has a view that it''s a sort of a double whammy in terms of the charging Rs 16 crore as well as raising the percentage usage charges for getting spectrum beyond 10-megahertz and this is going to add to the service cost.

He told CNBC-TV18 that the recommendations were very comprehensive and require detailed study.

He said, "But from initial responses, which I can give, they appear to be tightening up significantly for getting more spectrum beyond 10-megahertz. I think it''s a sort of a double whammy in terms of the charging Rs16 crore as well as raising the percentage usage charges. This is going to make it very tight, adding to the cost of service.

"Second aspect, which we notice, is that for any cross over technology allotment, the company will have to pay license fee and go through the process, which I think is a fair way of looking at it. Also they have not kept the cap on number of players, which is fine by us because it is always better to let market forces deal with that.

"The cap of 15 mega hertz on spectrum, which was rather untenable in the current scenario, has been removed. They have said that there should be no cap on mergers and acquisition and I think that''s a step in the right direction. For other things we will have to read it with details before we can respond."

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TRAI doubles operator cross-holdings to 20-per cent for telecom M&As