An Empowered Group of Ministers (EGoM) has approved a merger and acquisition (M&A) policy for the telecom sector. As per the new guidelines, the EGoM has increased the cap on the market share of a merged entity in a circle from 35 per cent to 50 per cent.
An operator will be entitled to own only one block of spectrum which has been allotted to it at an administrative price without participating in an auction. The merged entity would have to pay the market price for any additional spectrum which it holds beyond the one block of spectrum. This implies that if a dual-technology holder acquires a single technology operator, or vice versa, the resultant entity would ultimately own three blocks of spectrum and would have to pay market price for two blocks.
In addition, the EGoM has also decided to allow a merged entity to hold up to two blocks of 3G and broadband wireless access spectrum as against one block that the operators allowed to hold currently. It has also taken a decision to retain the spectrum cap of a merged entity at 25 per cent of the total spectrum allocated for access services and 50 per cent of the spectrum allocated in a given band, by way of auction or otherwise, in a circle.
Even though the EGoM has decided to continue with the three-year lock in period clause before an operator can raise equity, the Department of Telecommunications (DoT) will seek legal opinion on whether operators can merge with other entity within the three year lock in period. DoT will take a decision whether a merger would entail dilution of equity and not a sale of equity.
A final decision on the M&A policy is likely to be taken by the government on December 5, 2013.
