India Government eases mergers and acquisition procedures in the telecom sector

Mergers and acquisitions in India’s telecom sector will now be easier as the government Wednesday announced new norms for the industry, which it said would lead to a more efficient use of spectrum and help customers get better services at an affordable price.

Merger up to 35 percent market share of the resultant entity will be allowed through a simple, quick procedure, Communications Minister Kapil Sibal said, unveiling the changes in policies governing licenses, spectrum and merger norms for the sector that is set to enter a consolidation phase after the Supreme Court ordered cancellation of 122 2G licenses issued in 2008 without auction.

A new national telecom policy will be announced in April, Sibal added.

Telecom service providers welcomed the move saying it will help the sector but added that the government should also consider allowing spectrum sharing in all the bands.

Sibal said that henceforth all players will need to stick to the prescribed limit on spectrum and that mergers beyond 35 percent would be allowed only in cases where it did not violate this limit and other conditions which will be detailed later.

Post-merger, if the spectrum held by the combined entity was beyond the prescribed limit, the excess spectrum must be surrendered within one year of the merger being permitted.

Market share, based on both number of subscribers with the players and revenue, shall be considered while granting permission for the merger.

The Supreme Court has ordered cancellation of 122 licenses issued in 2008 in four months and asked the regulator to propose rules for grant of airwaves through an auction. The ruling has affected a few foreign players such as Oslo-based Telenor – the parent firm of Uninor, Sistema who in a joint venture with Shyam Group has its India operations under the MTS brand and Abu Dhabi-based Etisalat, which has 45 percent stake in Indian telecom firm Etisalat DB.