Permit spectrum trade,M&As will follow: Vodafone’s Pieters

While pointing out problems with the M&A policy,Pieters said he would not buy the company on offer even if the M&A norms were liberalised. “I (Vodafone) may just want to buy 3G spectrum in circles where I don’t have these high-speed radio waves. I may not want to buy the tower assets of the company,I have 115,000 of my own. But current norms do not allow you to buy just the spectrum.

A lot of acquisitions are waiting to take place; once rules allow you to sell assets,you don’t need the merged entity.”

He said that though the new telecom policy has endorsed spectrum trading,there has not been any follow-up action by the government.

With regard to the M&A policy in the works,Pieters said it was restrictive since it put a low ceiling on how much spectrum a merged entity could hold — the 25 MHz

proposed by Trai is still lower than that held by most global players who have much smaller subscriber bases.

The other major irritant is the spectrum usage charge. “The more spectrum you have,the more you have to pay to the government,even if you have bought it through market-determined prices,” Pieters said.

He said the government should either not levy spectrum usage charge or keep it at a flat rate. Currently,the spectrum usage charge is 3-8% of the operators’ adjusted gross revenue.

For instance,it starts at 3% of the AGR for spectrum up to 4.4 MHz. As the spectrum holding increases to 6.2,8.2,10.2,12.2 and 15.2 MHz,the charge also increases by a percentage point each,going up to 8% of the AGR.

What that does,Pieters said,is to knock out a lot of value when you look at M&As. If a company has to pay,for instance,8% of AGR after a merger as compared to 3% now,it is going to look the M&A quite unfavourably.

Pieters said the M&A guidelines only facilitate a big player buying out a small player. Trai has recommended the combined market share of the merged entity should be 35%. If it ranges between 35-60%,then the regulator’s approval needs to be taken. The market share of Bharti,Vodafone and Idea stand at 28%,23% and 19% respectively; so,the 35% mark would get breached if any M&A happens among them.