Voda, Idea may Call for Eas­ing Spec­trum Caps

Cos likely to ar­gue that con­sol­i­da­tion will cut no. of play­ers, make cur­rent caps ir­rel­e­vant

The Economic Times - - Front Page - Anan­dita.Manko­tia @times­group.com

New Delhi: Voda­fone In­dia and Idea Cel­lu­lar, in talks for a pos­si­ble merger, are likely to ask the Depart­ment of Telecom­mu­ni­ca­tions for a re­lax­ation in the amount of spec­trum tel­cos can hold, cit­ing the on­go­ing con­sol­i­da­tion wave that would re­duce the num­ber of play­ers and ren­der ex­ist­ing lim­its ir­rel­e­vant.

If In­dia’s sec­ond and third-largest tel­cos do ac­tu­ally de­cide to merge, the re­sul­tant en­tity would need to sur­ren­der a sig­nif­i­cant amount of spec­trum un­der the cur­rent rules. A tele­com operator can only hold a max­i­mum 25% of the to­tal spec­trum al­lot­ted/is­sued in a cir­cle and up to 50% of the air­waves al­lot­ted in any one band­width. That would mean breach­ing the cap in four cir­cles for the cov­eted 900 MHz band and in 12 cir­cles for the 2500 MHz band, ac­cord­ing to a Credit Suisse re­port.

“Both the com­pa­nies are first try­ing to fig­ure out how they can com­bine their air­waves across all bands to get con­tigu­ous chunks of air­waves and for the balance air­waves, which ex­ceed the caps, they could soon make a pre­sen­ta­tion to the depart­ment ex­plain­ing that cur­rent mar­ket con­di­tions re­quire rais­ing of caps on the quan­tum of air­waves that can be held,” said a per­son fa­mil­iar with the de­vel­op­ment.

“Chang­ing mar­ket con­di­tions” are rea­son for seek­ing a re­lax­ation in the cap, said the per­son cited ear­lier.

Idea, part of the Aditya Birla Group, and the lo­cal unit of UK’s Voda­fone Group Plc are likely to pro­pose rais­ing the 25% cap by about10 per­cent­age points and abo­li­tion of the 50% cap, he said.

“In the cur­rent sce­nario, given the spate of con­sol­i­da­tion in the in­dus­try, it makes sense to ex­pand this to 35%, since this cap was put in place when the in­dus­try had well over six tele­com play­ers,” the per­son said, adding that an Idea-Voda­fone merger will likely re­sult in four sig­nif­i­cant tele­com op­er­a­tors in In­dia. “As it is, the rev­enue mar­ket share caps will con­tinue and are ef­fec­tive to check dom­i­nance.” Voda­fone de­clined to com­ment while Idea didn’t re­spond to an emailed re­quest for com­ment.

Ra­jan Mathews, di­rec­tor-gen­eral of the Cel­lu­lar Op­er­a­tors As­so­ci­a­tion of In­dia (COAI) lobby group, backed such a move, say­ing the gov­ern­ment should take an­other look at the lim­its since the depart­ment is re­view­ing li­cens­ing.

“Given the in­creas­ing con­sol­i­da­tion across the in­dus­try, it is im­por­tant the gov­ern­ment ad­just the caps ac­cord­ingly,” Mathews said. “We would like to raise this with the DoT in fu­ture.”

MERGER PLANS

Reliance Com­mu­ni­ca­tions, MTS and Air­cel are also in the process of form­ing a sin­gle en­tity, which will leave cur­rent mar­ket leader Bharti Air­tel, Voda­fone-Idea and new en­trant Reliance Jio as the other ma­jor pri­vate sec­tor play­ers if all the merger plans go ahead. Voda­fone Group and the Aditya Birla Group have said they are in ne­go­ti­a­tions over an equal merger of their tele­com busi­nesses in In­dia. The talks are said to in­volve Voda­fone buy­ing fresh Idea stock in an all-share deal that would cre­ate In­dia’s largest telco by sub­scribers and rev­enue mar­ket share. The two com­pa­nies may ar­gue that scrap­ping the 50% in­tra-band spec­trum hold­ing limit makes sense, given tech­no­log­i­cal trans­for­ma­tions in the cap­i­tal-in­ten­sive sec­tor.

“The re­stric­tion that the amount of air­waves an operator can hold in any one band­width shouldn’t be more than 50% is also ir­rel­e­vant to­day,” said an­other per­son fa­mil­iar with the de­vel­op­ment. “With 4G tak­ing prece­dence and mo­bile data sub­sum­ing the tra­di­tion­ally sep­a­rate voice ser­vices, and all spec­trum be­ing pur­chased through auc­tions, the lines are get­ting blurred.”

The per­son said cur­rent re­stric­tions would hurt tech de­ploy­ment, which needs con­tigu­ous air­waves. The Credit Suisse re­port pegged the ag­gre­gate value of the spec­trum that would have to be fore­gone by Idea-Voda in the event of a merger at .₹ 18,000 crore un­der cur­rent rules. “Anti-trust re­stric­tions would re­quire Voda-Idea merged en­tity to let go (some) .₹ 18,000 crore of ex­cess spec­trum, in­clud­ing over .₹ 6,000 cr of air­waves in pre­mium 900 MHz band alone in Ma­ha­rash­tra, Gu­jarat, Ker­ala and Haryana.”

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