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Tuesday, March 31, 2020

Telecom licences: TRAI for reforms in transfer, merger guidelines, factoring in less players

Trai has now released its recommendations on reforming the guidelines for transfer and merger of telecom licences, after the telecom department in May 2019 sought its views on enabling simplification and fast-tracking of approvals.

By: ENS Economic Bureau | Updated: February 22, 2020 6:22:34 am
The virtual network operators can provide telecom services like mobile landline, internet, but only as a retailer for full-fledged telecom operators.

The Telecom Regulatory Authority of India (Trai) on Friday suggested that in case of merger of telcom companies and their licences, only the revenue of the company should be taken into account for other services like national and international long distance telephony. Apart from that, the one-year timeline currently allowed for merger and transfer of licences should exclude the time taken by the companies in litigation, Trai suggested.

The sectoral regulator also suggested that guidelines for such transfers and mergers of licences should not be ‘hard code’.The guidelines, Trai suggested, should take into consideration the that from about 14 operators a decade ago, it has come down to just four.

Trai has now released its recommendations on reforming the guidelines for transfer and merger of telecom licences, after the telecom department in May 2019 sought its views on enabling simplification and fast-tracking of approvals.

Trai’s suggestions range from marketshare math to approval timelines, and other terms.

Trai noted that the guidelines should be seen in the backdrop of consolidation in the market from 12-14 service providers a decade ago to four operators now, the National Digital Communication Policy’s thrust on speedy approvals and the delays in mergers being taken on record.
“The authority recommends that for computing market share of an NSO (Network Service Operators) in the relevant market, market share of the VNO (virtual network operator) parented with it should be added to the market share of NSO, if the NSO is a promoter of VNO,” Trai said.

The virtual network operators can provide telecom services like mobile landline, internet, but only as a retailer for full-fledged telecom operators.

“For calculation of one year that is time period allowed for transfer/merger of various licenses in different service areas subsequent to the approval of the Tribunal/Company Judge, the time spent in pursuing any litigation on account of which the final approval of a merger is delayed, should be excluded,” Traisaid.

This would protect the rights of a telecom operators to pursue remedies in court and also ensure that the period of one year does not become redundant for no fault of companies on account of pendency of an issue before a court, one of the stakeholders cited by Traihad submitted. Another provision of the acquisition guidelines which provides an exemption from substantial equity/cross holding clause for a period of one year or more should be modified such that the said exemption is provided only for a period till transfer/merger of licence is taken on record by the licensor (telecom department), Trai recommended.

It also suggested that both the number of subscribers as well as Adjusted Gross Revenue (AGR) should be considered for determining the marketshare in case of services like access, internet and VSAT. And that only AGR should be considered for determining the marketshare for rest of the services like national and international long distance, and resale of international private leased circuits.

The authority recommends that guidelines should explicitly mention that consequent upon payment of market determined price for spectrum, such spectrum would be treated as liberalised, that is technology neutral. Trai has reiterated its recommendation if a transferor firm holds a part of spectrum which has been assigned against entry fee, the resultant entity should be liable to pay differential amount for the spectrum assigned against the entry fee paid by the transferor, from the date that the DoT approves the transfer/merger.

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