The Hindu : Phone companies can merge within service area

Online edition of India's National Newspaper
Sunday, Feb 22, 2004

National

National

Phone companies can merge within service area

By Our Special Correspondent

NEW DELHI, FEB. 21 The Government today retained the monitoring rights while allowing mergers of telecom companies within a service area.

The mergers will be scrutinised by the Department of Telecom and subject to several conditions in order to retain the spirit of competition.

In order to prevent the emergence of one or two powerful service companies, which could lead to the formation of price fixing cartels, the Government has banned mergers if less than four companies are in the field.

Another guideline bars mergers if the merged companies collectively have more than two-thirds of the market share in a service area. This too is aimed at preventing virtual monopoly. The Telecom Regulatory Authority of India (TRAI)'s recommendations, submitted to the Government on January 30, suggest stricter, norms such as refusing a merger if the market share of a merged entity was more than 50 per cent and the concentration ratio of top two firms in a post-merger scenario is over 75 per cent.

The merger of the licence is restricted to the same service area and between the same types of service. Any licence category can merge with the unified access service licence but different norms apply for the basic licencees who had not applied for migration to the unified licences. A basic service licence can be merged only with a basic service licence. The same condition applies to the cellular service licences. Besides, the basic licensee will have to pay the entry fee before merging with a unified licensee.

The Government has also specified the norms for the total amount of airwaves than could be retained by the merged companies.

The amount of spectrum operated by a merged company shall not be more than 15 Mhz for the four metros and "category A" States and 12.4 Mhz for all other States.

The new entity has been given the discretion to choose the band to surrender if the spectrum availability exceeds the stipulated amount. In this case, the Government has fully accepted the TRAI's recommendations.

The recommendation of the TRAI it being given the right to intervene in certain situations did not find favour with the Government as it felt that disputes would be referred to the Telecom Dispute Settlement and Appellate tribunal (TDSAT).

The Government accepted the recommendation of reviewing the guidelines after one year or earlier, if needed. The TRAI had felt that this clause was necessary as the telecom industry was in a state of flux and would need some time for the market to stabilise.

In such a situation, a review of the guidelines could be required to adjust to the new realities of the market place.

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