The Department of Telecommunications (DoT) has asked the Telecom regulatory Authority of India (TRAI) to review its recommendations on the timeframe provided to operators to surrender excess spectrum and the rationale behind a spectrum transfer charge in the case of the merger of two entities.
In May 2011, TRAI had published its recommendations on a Spectrum Management and Licencing Framework, wherein it had said that consequent to the merger of licences in a service area, the total spectrum held by the resultant entity post-merger should not exceed 12.4 MHz for GSM technology and 10 MHz for CDMA technology.
TRAI had also recommended that excess spectrum beyond 6.2 MHz/5 MHz held by the resultant entity, pursuant to merger/acquisition, would be liable to be charged at the current market price.
Furthermore, TRAI had suggested that if, as a result of the merger, the total spectrum held by the resultant entity was beyond the prescribed limits, the excess spectrum must be surrendered. The resultant entity from a merger or acquisition could choose the band to surrender spectrum beyond the ceiling level.
Consequent to the merger of licences in service areas, the resultant entity would be entitled to the total amount of spectrum held by the merged entities. However, this is subject to the condition that the licencee will surrender any excess spectrum held by it, as per the allocation cap stipulated for GSM and CDMA technologies, within three months.
In case the post-merger licencee is unable to meet the spectrum allocation criterion within three months, it shall surrender the excess spectrum, if any. If this is not carried out, it will be considered a violation of the terms and conditions of the licence agreement and appropriate action will be taken.
Furthermore, TRAI had recommended that a spectrum transfer charge, at 5 per cent of the difference between the transaction price and the total spectrum price, will be payable by the merged licencee within three months, after the merger is approved by DoT.
