iWorld
Mergers and acquisition policy being given final touches
NEW DELHI: Though the Department of Telecom (DoT) is expected to drop the three-year mandatory lock-in period for promoters of telecom companies under the new mergers and acquisition rules expected this week, the recent reports of high reserve price for spectrum may prove to be counter-productive.
Initially, the government had introduced the lock-in period to prevent speculative players from misusing the opportunity to sell spectrum at market price after acquiring spectrum from the government under the first-come-first-served policy.
But since fresh spectrum allocation is being done only through auction and older players who had got spectrum under the earlier dispensation have completed more than three years, the government has decided that the lock-in period is not necessary.
The draft of the M&A norms say that “Further lock-in condition may hamper the progress and roll out of capital intensive telecom projects as shareholders may not be able to invest further equity.”
Industry sources feel that some of the players in each circle may want to leave because of poor financial returns and increasing debt.
The proposed M&A policy may not allow such players to leave, and rules are clear on issues such as spectrum trading, and the draft also says the buyer will have to pay the government the market price for any spectrum the seller holds under the older dispensation of first-come-first-served.
While the TRAI had initially proposed a flat fee, the DoT is keen to retain the existing slab system where operators with higher amount of spectrum have to pay a higher revenue share.
