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Telcos may get one year to conform with M&A norms under new Unified Licence regime

Telcos may get one year to conform with M&A norms under new Unified Licence regime

By Press Trust of India | Updated: 7 August 2013 13:00 IST

Telecom operators acquiring rivals will have one year's time to conform with cross holding norms that prohibit companies from having more than 9.9 percent stake in competing firms.

In fact, under the norms for new Unified Licence regime announced last week, operators are completely barred from holding any stake in a rival company.

In draft guidelines for mergers and acquisitions (M&As), the government has noted that many telecom service providers are listed on stock exchanges and have to go through a long process to complete the deal.

Citing liberal feature of National Telecom Policy 2012, the draft proposes that the "time period of one year will be allowed for merging of various licences in different service areas and the substantial equity/cross holding equity restrictions as specified" in existing permits and new Unified Licences "shall not be applicable during this period of one year."

This is expected to give companies time to balance or offload stake in other companies to conform with the existing as well as the proposed cross holding rules in case of M&As.

The guidelines that have been okayed in principle include expeditious approval to merger proposals of telecom companies if their combined market share is up to 35 percent.

DoT will seek telecom regulator TRAI's recommendation in case the resultant entity has 35-60 percent market share.

Consequent upon the merger of licences, the total spectrum held by the resultant entity should not exceed 25 percent of the spectrum assigned, by way of auction or otherwise, to it in the concerned service area in case of GSM spectrum services which include 900 and 1800 megahertz (MHz) bands frequencies.

In respect of 800 MHz band (CDMA services), the in- principle approved guidelines state that the ceiling will be 10 MHz and for other spectrum bands, relevant conditions pertaining to auction of that spectrum will apply.

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