The Telecom Commission (TC) has decided not to impose a spectrum transfer charge on Merger and Acquisition (M&A) deals. TC believes that the concept of transfer charge is not very relevant as the government is now planning to move towards a market-based pricing mechanism for spectrum.
The TC?s move is likely to encourage consolidation in the sector as it will reduce the cost of M&A deals. Further it will bring relief to new players looking to exit the sector.
Earlier, the Telecom Regulatory Authority of India (TRAI) had proposed that the government should charge 5 per cent of the difference between the transaction price and the market price as spectrum transfer fee. This was aimed at preventing unreliable players from making windfall gains by selling spectrum after procuring it from the government at below the market price.
However, TC has retained the three-year lock-in period for new operators. It has also decided that merger between two telecom operators will be allowed as long as the combined market share of the merged entity remains less than 35 per cent. For determining market share, the merged entity’s subscriber base and gross revenue will be taken into consideration.
