Govt eases telco merger rules; defers spectrum pricing

The sun rises behind a communications tower in New Delhi March 20, 2006.

NEW DELHI (Reuters) - The telecoms ministry will allow mergers and acquisitions between operators that create a combined market share of up to 35 percent through a "simple and quick" process, the telecoms minister said, easing rules that were seen restricting deals in the sector.

The ministry, which approved many proposals as part of a new telecoms policy, has deferred a decision on 2G radio spectrum pricing and on a one-time levy on carriers holding spectrum beyond 6.2 mega hertz following a recent Supreme Court order asking the government to sell spectrum through auction.

Telecoms Minister Kapil Sibal declined to comment on the auction, saying the government was still studying the "implications and ramifications" of the judgment.

The court had ordered that all 122 zonal telecoms licences issued in the scandal-tainted 2008 sale be revoked in four months and had asked the regulator to propose rules for grant of radio airwaves through an auction.

India is overhauling its decade-old telecoms rules after the once-booming sector was hit by a massive telecoms licensing scandal, with a state auditor saying lucrative telecoms licences were given out at "unbelievably low" prices in 2008, causing the exchequer a loss of as much as $36 billion.

The new policy will be announced in April, Sibal said.

The sector regulator had earlier proposed a relaxation of rules for M&As in the telecoms sector in a move to facilitate a long-awaited consolidation in the 15-player market.

Sibal said his ministry had also accepted the regulator's proposal to allow companies to merge if the combined entity's market share is above 35 percent but does not exceed 60 percent, but will set rules later after consulting the regulator.

Indian mobile market leader Bharti Airtel said it expects the new M&A rules to pave the way for a consolidation in an "over-crowded" market.

For future grants, radio spectrum, which now comes bundled with a telecom licence, will be sold separately, Sibal said, reiterating the government's earlier announcement.

The ministry will also allow 2G radio spectrum sharing between carriers, but not 3G spectrum sharing, Sibal said. Carriers will not be allowed to trade or lease spectrum, he said.

The telecoms ministry has also decided to fix the licence fee for operators at 8 percent of their revenue, from a variable fee of 6 to 10 percent, Sibal said, adding the new fee would be implemented in two years, starting from fiscal year 2012/13.

Sibal said the government has accepted an "in-principle" proposal for spectrum refarming, or reassigning of frequency bands, at the time of renewal of telecoms licences, but will take a decision after receiving the regulator's suggestions.

Telecoms licences will be extended for 10 years, compared with the current practice of renewal after 20 years of grant, he said.

(Reporting by Devidutta Tripathy; editing by Malini Menon)