A series of changes are being made in an attempt to avoid the failings of the previous system. The country’s M&A system will be relaxed by allowing a simpler process for mergers that create a combined mobile market share of up to 35%.
Plans were set out to allow the sharing of 2G, but not 3G, spectrum, with no trading or leasing of spectrum allowed. Telecoms licenses are set to be renewed after 10 years, rather than the 20 now in place, and licenses will no longer be paired with spectrum for purchase.
A license fee cap of 8% of operator’s revenue was also decided and is to be implemented in the next two years.
Sibal said the ministry had accepted a proposal to allow companies to merge if the combined entity’s market share did not exceed 60%. In addition, proposals regarding spectrum refarming were also accepted in principal, with a formal decision to be made after receiving suggestions from the country’s regulator.
The plans will help to facilitate consolidation in the Indian telecoms market, which has 15 mobile operators, and are likely to be welcomed by operators.
Decisions regarding 2G radio spectrum pricing and a one-time levy on carriers holding spectrum beyond 6.2 hertz were deferred pending India’s upcoming 2G spectrum auction.
The changes to the Indian telecoms act follow one of the largest scandals in the country’s modern history, which resulted in the Indian Supreme Court cancelling 122 spectrum licences last month. The court considered the awarding of the 2G licenses in 2008 to be “totally arbitrary and unconstitutional” and asked the Telecoms Regulatory Authority of India to prepare for a re-auction of the licenses within four months.
Sibal has been working on the country’s telecoms policy since replacing now jailed former minister, Andimuthu Raja. Since his appointment he has been seeking to overhaul India’s entire regulatory framework through changes to its telecoms act.
Bahraini operator, Batelco, became the first international player to announce plans to leave the Indian market in the wake of the scandal. Batelco holds a 42.7% equity stake in operator STel India through its Indian subsidiary, BMIC Limited. The company has agreed to sell its stake to Sky City Foundation for $174.5million with the transaction expected to be completed by the end of October 2012.
An official audit at the end of 2010 estimated that the cost to the country, as a result of the previous rigged auction of mobile licenses, was $39 billion.
