Mumbai: The government has revised guidelines for intra service area merger of cellular mobile telephone service (CMTS)/Unified Access Service (UAS) licences. The revised guidelines has been issued keeping in mind public interest in general and consumer interest in particular, the government said in a notification.

The guidelines follow TRAI recommendations last year which had specified revision of merger guidelines.

The new guidelines have made it mandatory for telecom licensees to seek prior approval for mergers and acquisitions while no mergers and acquisitions of telecom licences would be allowed if the number of service providers reduce below four in a circle consequent upon the M&A.

Also, the combined market share of the merged entity in the relevant market shall not be greater than 40 per cent either in terms of subscriber base separately for wireless as well as wireline subscriber base or in terms of adjusted gross revenue.

Merger of licences would also be restricted to the same service area.

Merger of licences shall be permitted in the case of cellular mobile telephone service (CMTS) licences; Unified Access Services licences (UASL); and cellular mobile telephone  service (CMTS) licences with Unified Access Services lcences (UASL).
Post-merger all licences will be in the UASL category.

Following the merger, the entity shall be entitled to the total amount of spectrum held by the merging entities, subject to the condition both the licensees will meet within three months from the date approval of merger by DoT, it said.

DoT will use exchange data records (EDR) in the calculation of wireline subscribers and specifically visitor location register (VLR) data in the calculation of wireless subscribers for the purpose of computing market share based on subscriber base.

For determination of market power, market share of both subscriber base and adjusted gross revenue of licensee in the relevant market will be considered to decide the level of dominance for regulating the M&A activity.

The duly audited adjusted gross revenue shall be the basis of computing revenue based market share for operators in the relevant market, it said.

In case of failure to meet the spectrum allocation criterion in three months, the post-merger licensee should surrender the excess spectrum, if any, failing which it may be treated as violation of terms and conditions of the licence agreement and action accordingly shall be taken. After the expiry of the three-month period, the applicable rate of spectrum charge shall be doubled every 3 months in case of excess spectrum held by post  merger licensee.

Further, the spectrum transfer charge, as may be specified by the government, shall be payable within the prescribed period.

On merger, spectrum enhancement charge shall also be charged as applicable in case of any other UAS/CMTS licensee.

Discretion to choose the band to surrender the spectrum beyond the ceiling will be of the new entity.

All dues, if any, relating to the licence of the merging entities in that given service area, will have to be cleared by either of the two licencees before issue of the permission for merger of licences.

In case consequent to merger of licences in a service area, the licensee  becomes a ''significant market power'' (SMP)  post merger, then the extant rules & regulations applicable to SMPs would also apply to the merged entity.

The annual licence fee and the spectrum charge are paid as a certain specified percentage of the AGR of the licensee. On the merger of the two licenses, the AGR of the two entities will also be merged and the licence fee will be therefore levied at the specified rate for that service area on the resultant total AGR.

Similarly, for the purpose of payment of the spectrum charge, the spectrum held by the two licensees will be added/merged and the annual spectrum charge will be at the prescribed rate applicable on this total spectrum.

However, in case of holding of spectrum for various technologies by the entity subsequent to M&A, spectrum charges and licence fee etc. or any other criterion being followed by the licensor shall be applicable as in case of any other UAS/CMTS licensee.

For regulating acquisitions of equity stake of one access services licensee company/ legal person/promoter company in the enterprise of another access services licensee in the same license area, present guidelines on substantial equity shall continue i.e., ''No single company/ legal person, either directly or through its associates, shall have substantial equity holding in more than one licensee company in the same service area for the access services namely; basic, cellular and Unified Access Service. 'Substantial equity' herein will mean 'an equity of 10 per cent or more'.  A promoter company/legal person cannot have stakes in more than one licensee company for the same service area.''

Any permission for merger shall be accorded only after completion of three years from the effective date of the licences.

The duration of licence of the merged entity in the respective service area will be equal to the remaining duration of the licence of the two merging licencees whichever is less on the date of merger.

The dispute resolution shall lie with Telecom Dispute Settlement and Appellate Tribunal as per TRAI Act 1997 as amended by TRAI (Amendment) Act 2000.

Licensor reserves the right to modify these guidelines or incorporate new guidelines considered necessary in the interest of national security, public interest and for proper conduct of telegraphs.