Idea, Aircel, Tata Docomo, Uninor to become hot cakes for merger and acquisitions

Telecom operators such as Idea Cellular, Aircel, Tata Docomo and Uninor are set to become hot cakes for
merger and acquisitions.

The new guidelines on merger and acquisitions are unlikely
to encourage consolidation among big operators in a big way since a
merged entity with 60 percent market share needs to get approval from the
telecom regulator.

The new guidelines which were approved by the Telecom
Commission headed by Telecom secretary R Chandrasekhar stipulate that the
combined entity should have a market share of under 35 percent in case of a
merger between two telecom service providers. If the merged entity holds more
than 60 percent share, it needs approval from the telecom regulator.

Companies such as Idea Cellular (11.55 percent market share),
Aircel (6.84 percent), Tata Docomo (9.97 percent) and Uninor (3.67 percent)
will be hot in the market for a merger move or being acquired by a big

This guideline will prompt Vodafone, Bharti Airtel and Reliance Communications
to associate with other top mobile operators in India. Top three mobile
operators include Vodafone (16.56 percent market share in mobile segment),
Bharti Airtel (19.71 percent) and Reliance Communications (16.81 percent).

A merger between Airtel and Idea Cellular will be a
possibility without taking approval from TRAI. Buying new mobile licence
holders will become the main option for big telecom operators. But this will be
done mainly for accessing spectrum. Most of the new mobile operators do not
have enough subscriber base to get good valuation.

New operators command less than 4 percent market share.
Uninor with 3.67 percent share is the leading among new operators. MTS enjoys
1.59 percent market share, while Videocon and Loop has 0.69 percent and 0.36
percent, respectively.

Further, the merged entity’s total spectrum holding should be less than 25
percent of the total airwaves available to telecom operators in a circle. In
case the market share exceeds the 35 percent but remains under 60 percent
telecom regulator TRAI will carry out detailed examination to ensure that there
is no market dominance, according to Economic Times.  

This is a relaxation over the present regime, which mandates a 40 percent on
the merged entity’s market share. Besides, they stipulate that the combined
entity can retain 14.4 MHz or units of spectrum and the remaining has to be
returned to the government.

The twin moves are expected to facilitate M&A in the
Indian market which has more than a dozen operators in a circle leading to
intense tariff war. Experts and telecom company executives cite the global
experience of five-six operators per operation area to make the business

In addition, the Telecom Commission has also accepted the proposal related to
spectrum sharing by telecom companies.

A one-time fee on those holding excess spectrum is expected
to put cost pressure on several existing telecom companies ranging from BSNL
and MTNL to Bharti and Vodafone.

The Telecom Commission paved the way for a uniform licence
fee of 8 percent for telecom companies, from 6-10 percent at present, and has not ruled out levying a one-time fee on operators holding spectrum
beyond 6.2 mega hertz. It also decided to allot additional spectrum in future
only via the auction route.

By Baburajan K
[email protected]