SET TO APPROACH TELECOM DEPT - Voda, Idea may Call for Easing Spectrum Caps
Cos likely to argue that
consolidation will cut no. of players, make current caps irrelevant
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
allottedissued 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 about 10 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 allshare 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.“
“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 about 10 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 allshare 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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