The government has taken a decision to do away with the provision to impose a special levy on mergers and acquisitions (M&As) deals in the telecom sector, says news reports.
Earlier, an Empowered Group of Ministers (EGoM) headed by P.Chidambaram, Minister of Finance too had suggested removing the levy on M&As deals in the telecom sector.
EGoM was of the view that the mergers, in accordance with stipulated guidelines, lead to consolidation of spectrum and increased efficiency. Further, companies involved in merger deals would have already paid for their respective spectrum holding in accordance with the decision on pricing of spectrum. Therefore, there was no need for levying any additional charge on the operators in the event of a merger. According to EGoM, with the introduction of market based pricing of spectrum, spectrum transfer charges of 5 per cent should not be levied on the difference between the transaction price and the market price of spectrum.
Earlier, with operators winning licences in 2008 and issuing fresh equity to foreign investors at a huge premium, the Department of Telecommunications had proposed a spectrum transfer charge to prevent operators from making windfall gains by selling spectrum at market valuations. At the same time the Telecom Regulatory Authority of India (TRAI), proposed that the spectrum transfer fee, which is the difference between the transaction price and the market price in the case of M&As, be fixed at 5 per cent.
However, subsequently, the Telecom Commission, rejected TRAI?s proposal on the ground that the proposed ‘charge had no sound rationale’.
