The Hindu : Norms soon for intra-circle M&As in telecom

Online edition of India's National Newspaper
Wednesday, Feb 18, 2004

Business

Business

Norms soon for intra-circle M&As in telecom

By Our Special Correspondent

NEW DELHI, FEB. 17. In another major development in the telecom industry, the Government is expected to issue guidelines for intra-circle mergers and acquisitions this week. "The matter of intra-circle mergers and acquisitions will be put up to me tomorrow or day after and I will be able to report on it in two days,'' the Union Communications and Information Technology Minister, Arun Shourie, said at the Gartner Telecom Summit here today.

He, however, declined to say whether the Ministry would accept the Telecom Regulatory Authority of India (TRAI) recommendations on the subject in toto. The industry has been awaiting the guidelines in order to start merger and acquisition related activities, he said.

On the issue of hiking the foreign investment limit in telecom services to 74 per cent from 49 per cent at present, Mr. Shourie said it was a matter to be addressed after elections.

The TRAI had last month recommended mergers and acquisitions within a circle, subject to certain conditions such as the number of operators in any circle should not fall below three. In its guidelines for intra-circle mergers and acquisitions, TRAI had said examination of the impact of merger would be conduced by competent authority (licensor) in cases where the market share of merged entity was greater than 50 per cent and where concentration of top two firms in a post-merged scenario was over 75 per cent. While giving its recommendations, TRAI said that if following a merger under consideration, the number of operators in any circle or served market reduces below three, the competent authority would not allow the merger.

Shakeout expected

Meanwhile, making its presentation at the summit, Gartner said that with the unified regime acting as a catalyst for consolidation, Indian cellular industry was estimated to witness hectic restructuring in 2004, leading to a market of no more than four large nationwide players — Bharti, Reliance, Tatas and BSNL. "Four cellular groups will survive and thrive through 2004: Bharti, Reliance, Tata and BSNL. Other operators will survive as niche market players, or be absorbed through merger and acquisition,'' Gartner said in its predictions for 2004. According to Gartner, the unified licensing regime had reduced the artificial constraints on open market competition, creating an environment favouring the stronger and more innovative players. It said size and volume would increasingly matter.

SMS market to grow

In another of its findings, Gartner said sending messages on mobile phones was gaining popularity as outbound SMS volumes in India grew by 200.8 per cent to reach about 7.4 billion messages in 2003, although the usage level was still lagging behind other developing markets in Asia-Pacific. "The outbound SMS volumes in India grew by 200.8 per cent year-on-year to reach 7.39 billion messages in 2003. This is equivalent to 35.8 outbound SMS messages per cellular connection per month,'' Gartner said.

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