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Trai kicks off debate on revised rules for M&As

Trai kicks off debate on revised rules for M&As
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First Published: Wed, Jun 13 2007. 01 22 AM IST
Updated: Wed, Jun 13 2007. 01 22 AM IST
New Delhi: In a move that could have far-reaching consequences for phone firms in India, the country’s telecom regulator has invited feedback from the industry, public and other stakeholders on relaxing rules aimed at keeping anti-trust practices at bay in the fast-growing industry.
On the menu are provisions such as capping the number of mobile operators in each licensed area, allowing them to take controlling stakes in rival firms and removing the cap on the maximum spectrum to be held by one operator.
“In the light of increasing global interest in the Indian telecom market, the use of mergers or acquisitions as an entry route, and the possible strategy changes of current service providers, it will be important to review these rules and conditions so as to ensure that the Indian market remains competitive and is able to sustain future growth,” the Telecom Regulatory Authority of India (Trai) said, explaining the motivation behind a consultation paper it released on Tuesday.
The regulator explained that many of the restrictions on operators buying out one another were introduced in 2004, to prevent the emergence of monopolies when competition levels were lower. Current laws prevent any telecommunication company from buying more than 10% of another operator functioning in the same licensed area, or ‘circle’, and also requires the company to surrender any spectrum in excess of 15 megahertz (MHz) after the merger.
Today, Trai said, the Indian wireless market has a “high degree of competition” with a total of four national operators and around five or six operators vying for consumers in each service area. This increase in the number of operators, partly a result of the ban on acquisitions, has put pressure on the “scarce resource” of spectrum, compounded by the addition of more than six million customers per month, it pointed out.
The regulator has also asked stakeholders if there is a need to cap the number of players in each circle, keeping in mind the spectrum crunch. Pan-Indian operators such as Bharti Airtel Ltd, Hutchison Essar Ltd and Bharat Sanchar Nigam Ltd qualify for more spectrum in many circles, placing them in conflict with regional operators such as Idea Cellular Ltd, Aircel Cellular Ltd and Spice Telecom Ltd, who are seeking more spectrum to expand across the country.
The authority pointed out that the current policy of allowing everyone to apply for licences while allocating spectrum to existing players on the basis of the number of subscribers could not be reconciled with each other.
“Even the 20Mhz spectrum... which is likely to be vacated by the defence (sector) in the near future will be just sufficient to meet the requirement of the existing operators, that too up to December 2007 only,” it said, asking for feedback on whether the allocation criteria should be changed or whether new applicants should be discouraged.
Trai has also mooted doing away with the obligation on the part of the operators to cover a fixed proportion of area under the licence in a given timeframe, preferring financial incentives to achieve the targeted coverage. “It is felt that a combination of incentives and penalties could provide better motivation for the licencees to meet their obligations,” it said, mooting measures such as reduction in licence fees and spectrum charges for those who meet their obligatioins.
The industry has been generally supportive of the re-look at the rules, but consumer groups voiced apprehension. “Though we say there are five or six operators and enough competition, for the consumer his choice is limited to two or a maximum of three operators,” said Achintya Mukherjee of the Bombay Telephone Users’ Association. “In every circle, there are two CDMA operators and three GSM operators. If you are a CDMA customer, your choice is restricted and if you are GSM customer, you have a choice of only two, and sometimes three operators.”
Romal Shetty, director for telecom risk analysis service with consultant KPMG International, concurred, pointing out that the problem with spectrum has to be addressed through freeing up more of it rather than plugging the number of service providers. “If we have congestion on the roads, the right way to go about it would be to build more roads, not ban vehicle production.”
The Cellular Operators’ Association of India, a trade body of GSM operators, said, “all the issues have surfaced in a fair and neutral manner” while reserving comments on the finer details, while the Association of Unified Licence Providers of India that represents the interests of landline and CDMA operators, said it welcomed the move to re-examine the rollout obligations and would make a detailed response later.
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First Published: Wed, Jun 13 2007. 01 22 AM IST
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