Trai recommends smoother M&A norms for ease of doing business

Published On: 01, Dec 2017 | Source: Timesofindia

NEW DELHI: The telecom regulator has recommended faster and time-bound approval of M&A proposals, more options for conforming to spectrum holding limits post a merger and streamlining of the penalty levy process among several steps to improve ease of doing business in the rapidly consolidating but financially-troubled sector.

"Promoting ease of doing business is essential for unhindered growth of the telecom sector and is amongst the priorities of the government. To support and actively encourage this, processes that telcos go through should be reviewed, simplified and/or combined to economise efforts of telcos and government," the Telecom Regulatory Authority of India (Trai) said in its recommendations, which need to be cleared by the DoT.

Trai suggested that the telecom department should spell out a definite timeline, not exceeding 30 days post National Company Law Tribunal (NCLT) approval, for providing written approval to transfer or merger of licences and that it should be made a part of the M&A guidelines as well. At present, DoT does not have a time limit for approving M&A proposals, but it has a 30-day period to raise any issues after a merger proposal has been submitted with the NCLT.

"In the past, it has been noticed that the written approval for merger of service licences from the Licensor sometimes takes a very long time. Such considerable delays could also hamper the benefits of synergies through merger," Trai reasoned.

The Indian telecom industry, hit by a brutal price war, has seen rapid consolidation since the start of the year. No. 2 Vodafone India and third ranked Idea are in the process of merging, and have already filed for approval in the NCLT. Market leader Bharti Airtel has announced buying Telenor India, which is pending clearance from the DoT after getting NCLT's nod in August, and Tata Teleservices' consumer mobile business, for has been cleared by India's anti-trust body, but is yet to be taken to the NCLT for clearance.



The regulator also suggested allowing trading of excess spectrum of a merged entity within a year instead of just surrendering, and framing guidelines that would link penalty amount to the severity of the violation and its recurrence, instead of imposing the maximum penalty of Rs 50 crore for each violation, suggestions that were welcomed by carriers.

"At the time of issuance of M&A guidelines, spectrum trading was not permitted. In October 2015, DoT permitted spectrum trading," the Telecom Regulatory Authority of India (Trai) said on Thursday while issuing the recommendations.

"Since a mechanism is now in place, the resultant entity after merger should be given an option to either surrender or trade its spectrum holding to shed off its extra spectrum holding beyond permissible spectrum cap, within one year," it said, adding that the M&A guidelines should be amended accordingly.

The telecom industry said that the moves when implemented by the DoT would improve business environment in India and add clarity on a policy level, at a time when consolidation is reducing the number of players but not reducing the competition.

"They (the suggestions) will go a long way in helping the industry move forward," said Rajan Mathews, director general of Cellular Operators Association of India (COAI), which represents all carriers including Bharti Airtel, Vodafone India, Idea Cellular and Reliance Jio.

"The will also help the Indian Index go up in ease of doing business, given that we have large investors here and more coming in (towers side). The DoT should approve these recommendations soonest," he added.

Trai began consultation on March 14, this year, when it asked stakeholders to review the existing processes and identify the bottlenecks, obstacles or hindrances that were making it difficult to do telecom business in India and, thus, require regulatory intervention.


The regulator reiterated that DoT should streamline the penal process such that telcos are not unduly penalised, adding that it had suggested imposing penalties in a staggered way - from minor to major offences - and also suggested the principles for deciding the severity, back in 2012.

"So far, DoT has not forwarded any report in this regard," Trai said, adding that DoT should devise a suitable matrix that will link the amount of penalty to severity of the incident and recurrence of the violation.

The regulator has also recommended amending spectrum trading guidelines to keep the permissible block size for trading in a band same as specified in the notice inviting applications - the legal document that lays downs rules for the auctions - for the latest auction held.


The suggestion was made on the grounds that in the 2016 auctions the block size in 2300 Mhz and 2500 MHz bands were reduced from 20 MHz to 10 MHz, which meant that possibility of further change in block size could not be ruled out. Also, new spectrum bands are likely to be introduced in the future auction, therefore it would be appropriate if guidelines do not hard-code the spectrum bands and applicable block sizes.


"While these are steps in the right direction, more is required. There should be a sense of urgency to address fundamental problems of the sector including lack of profitability, shrinking cash flows, lack of capital for further investments in new generation technologies and potential NPAs besides the cumulative debt of Rs 4.5 lakh crore," said Hemant Joshi, partner at consultancy firm Deloitte.


Other steps recommended include taking online the entire process of site clearances, besides grant of all licences and approvals by the wireless planning coordination wing, reviewing the fee of Rs 1000 per application since telcos deploy roughly 20,000 sites every month, setting a 30-day limit, instead of nearly two months, for giving license for importing radio equipment from overseas, and that this should be done online. Also, telcos should be allowed to install or redeploy the equipment in any circle without seeking prior approval.


Also, licenses for demonstrating new equipment or experimentation for new technologies like 5G or IoT, should be granted within 15 and 30 days, respectively. Experimental license should be valid for six months instead of present three months, and extendable by another six months.

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