news


India to relax telecom M&A rules

India's Bharti Airtel posts increases in revenue, but net profit was in decline

The Telecom Regulatory Authority of India (TRAI) has submitted new guidelines to the Department of Telecoms (DoT), which, if approved, will relax the rules surrounding mergers and acquisitions (M&A) activity in India’s telecoms market.

Under the new proposals, carriers in India will now be allowed a maximum subscriber market share of 60 per cent in each of India’s 22 circles, up from the previous threshold of 35 per cent. The proposals also see the introduction of a 25 per cent cap on spectrum holding, meaning each operator is entitled to a maximum of a quarter of each spectrum band in each of India’s circles.

The TRAI explained that the new proposals were needed as the country’s telecoms market is failing smaller operators, who are struggling to take any significant slices of market share and do not have an exit route to back out of the market.

“As a broad guiding principle, it is viewed that the M&A policy of DoT should be simple and easy to implement with minimal conditions necessary to ensure a balance between facilitating consolidation, ensuring competition and protecting consumer interest. It is also felt that the M&A regulations should be in harmony with other relevant legal and regulatory provisions,” it said in a statement.

At the end of December 2009, seven major players had a share of 98.65 per cent of India’s telecom market while the six new players had a collective share of only 1.35 per cent.

Even after the introduction of Mobile Number Portability (MNP) in January 2011, which empowered mobile phone consumers to change service provider, things did not improve significantly. At the end of June 2011, the seven major players continued to enjoy a significant share of 93.82 per cent while the six new players cumulatively had a share of only 6.18 per cent.

“Overall, there are around 14 operators in each circle – with nine or ten of them national-level players . The smaller ones, such as S Tel, Videocon, Etisalat are all  really struggling and haven’t been able to launch in all of the circles they wanted to,” said Anubhuti Belgaonkar, senior analyst for Asia Pacific at Informa Telecoms & Media.

“It’s a competitive market with very low rates; operators don’t seem to have been able to break even – they’re private companies, so we don’t know their financials, but subscriber numbers have been very poor.”

She added that, even after the implementation of MLP, the smaller operators haven’t really gained as a result, with most of the subscriber gains being made by Idea and Vodafone – the number two and three operators.

“These smaller operators are most likely to be acquired because currently, the Indian telecoms market does not have an exit route. The new licensees cannot sell their spectrum for a period of at least three years – so the exit route is quite difficult, and these operators have not been able to do much, because they’ve had to stay in the market and the market conditions are not very good for them, given how small they are,” added Belgaonkar.


Leave a comment

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Polls

How have open source groups influenced the development of virtualization in telecoms?

Loading ... Loading ...