Trai proposes to change M&A norms

NEW DELHI: The Telecom Regulatory Authority of India (Trai) on Friday proposed that the department of telecommunications (DoT) amend its mergers and acquisitions (M&A) guidelines for payment of spectrum charges.

The regulator has proposed that companies be asked to pay one-time spectrum charges calculated from the date of final DoT approval for the remaining period of the licence and not from the date of the National Company Law Tribunal’s (NCLT’s) approval.

DoT should calculate tentative demand from the date of NCLT nod and, upon grant of merger approval, the actual demand shall be recalculated on the basis of the date of grant of approval, the regulator has proposed. This is because the government raises the demand for these charges before giving final approval. The excess amount paid by the resultant merged entity, if any, shall be refunded or set off against other dues, said Trai.

If the government accepts Trai’s proposal, the merged entity of Vodafone India and Idea Cellular would receive some refund if it ends up paying DoT’s ₹3,900 crore cash demand for onetime spectrum charges.

DoT had on July 9 issued a letter of conditional approval for the merger with a demand of ₹3,900 crore in cash for transfer of unliberalized spectrum from Vodafone to Idea for airwaves up to 4.4 megahertz (MHz) and ₹3,300 crore in bank guarantees towards onetime spectrum charges arising on account of Idea’s unliberalized spectrum beyond 4.4MHz.

M&A guidelines state that the one-time spectrum charges to be paid by the acquiring company on account of transfer of airwaves up to 4.4MHz from the acquired company to the resultant merged entity are to be calculated on the basis of the difference bet-ween the entry fee and the market-determined price of spectrum from the date of approval of such arrangements by NCLT on a pro-rata basis for the remaining period of validity of the licence.

One-time spectrum charges are payable by companies which want to convert their administered spectrum or spectrum not bought in an auction to liberalized or auctioned spectrum. Auctioned spectrum can be deployed flexibly for any purpose, unlike administered spectrum.

Trai had in November sent to DoT its recommendations on “the ease of doing business in telecom sector” under which it has proposed that one-time spectrum charges be calculated from the date of written approval of merger of licences.

DoT had then asked Trai to reconsider its view and had suggested that DoT should raise the demand upon the acquiring company of these charges from the date of NCLT approval, with a stipulation that such demand is subject to revision after the grant of approval of transfer of licenses by DoT. Trai has now backed DoT’s views and proposed the change in merger norms.