Competition watchdog
Competition Commission of India (CCI) has asked
Telecom Regulatory Authority of India (Trai) and the
department of telecommunications (DoT) to ensure that the new guidelines on
mergers and acquisitions (M& A) restrict operators to establish their monopoly post-consolidation of the already overcrowded telecom industry.
The CCI had early this month issued proposals that would allow mergers between firms in India's crowded telecom services space to create companies with market share of between 35 to 60 per cent and help boost company earnings.
"We are constrained to write to DoT and Trai as we fear that some telcos may look at monopolising the market. These agencies have to make the guidelines effective enough to ensure that there is no room for wrongdoings," a top CCI functionary said.
Consolidation in the 15- player telecom industry is inevitable.
Trai's proposals, once accepted by the government, will allow firms to share, pool and trade radio airwaves and open the door to consolidation in the 15- player industry.
The once-booming sector has struggled in recent years due to ferocious competition and a massive graft scandal, prompting authorities to overhaul decades- old industry regulations.
Trai's proposals will now be considered by the Telecom Commission before it is made into policy. 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.
"Currently, a slew of M& A in the telecom sector are going on aimed at attaining competitive benefits. The M& A in the sector are regarded as horizontal mergers because the entities going for the M& A are operating in the same industry," says a telecom analyst.
Under the current M&A rules issued in April 2008, the combined market share of the merged entity is capped at 40 per cent.
According to the existing guidelines, on substantial equity, no single company either directly or through its associates 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 (UAS).
Substantial equity means equity of 10 per cent or more. M& A in telecom has showed a rising trend in the recent past.
The major deals included Bharti Airtel signing a deal to acquire Kuwait- based Zain Telecom's African business for $ 10.7 bn and Reliance Industries acquiring Infotel Broadband for $ 1 billion.
Unitech, Loop, Datacomm, Swan and five others who got licences and start-up 2G spectrum at throwaway prices in January 2008 are desperately looking to sell off their telecom licenses. Soon after Unitech, Loop, Datacomm and Swan got start-up license and spectrum, they sold some part of their stakes. But according to the current M& A norms, there is a three year lock- in period before companies can sell off spectrum.
Courtesy: Mail Today 
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