Merger & acquisition guidelines for telecom cleared

An empowered group of ministers (EGoM) 0f India cleared the much-awaited final merger & acquisition (M&A) guidelines for the telecom sector. The EGoM also decided to increase the quantum of 1,800-MHz spectrum to be put up for auctions in January to 403 MHz, an addition of 118 MHz, or 41.4 per cent, to what it had proposed earlier.

The addition also means that an average 18 MHz of spectrum will be up for sale in each circle – enough for three to four operators.

An acquirer will have to pay the differential between the auction-determined market price and the administrative price for anything beyond 4.4 MHz in the GSM band and 2.5 MHz in CDMA, if an acquired company has got spectrum after paying administrative price.

The M&A guidelines will now be sent to the Union Cabinet for its approval.

The ministers also agreed to increase the earlier-proposed 35 per cent cap on market share (in revenue, as well as user base) for merged entities in a circle to 50 per cent. However, if a merged entity breaches this 50 per cent ceiling in any circle, the companies will get a year to lower the share to below 50 per cent.

On the three-year lock-in period during which companies are not allowed to transfer equities, the ministerial panel decided to maintain the status quo for now. The matter is likely to be sent to the Attorney General of India for legal consultation.

The EGoM’s decision, experts say, will benefit incumbent operators like Bharti Airtel and Vodafone.

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