Bloomberg News

India Panel Approves Plan to Ease Mergers of Phone Carriers

December 28, 2011

(Updates with comment from analyst in fourth paragraph.)

Dec. 27 (Bloomberg) -- India’s telecommunications commission approved increases in available wireless spectrum, sharing and trading of airwaves and steps to make it easier for mobile phone companies to buy rivals.

The National Telecom Policy would increase the maximum market share for a merged phone company to 60 percent from 40 percent, R. Chandrashekhar, Telecom Commission chairman, told reporters in New Delhi yesterday. The commission, the Department of Telecommunications’ top policy-making body, will submit its draft to Communications Minister Kapil Sibal for review within a week, he said.

The new regulations may lead to consolidation in a market where competition among 15 carriers including Bharti Airtel Ltd. and local ventures of Vodafone Group Plc, Telenor ASA and NTT DoCoMo Inc. drove call charges to less than one penny a minute, eroding profitability.

“Many telecom players have been under financial stress, so there was a demand to smoothen out the M&A procedure,” said Jagannadham Thunuguntla, strategist at SMC Global Securities Ltd. in New Delhi. “I would be surprised if somebody put down billions of dollars to buy a telecom company in India.”

Stocks Drop

Shares of Bharti, the nation’s biggest wireless services provider, fell 0.5 percent to 343.10 rupees at close in Mumbai and Idea Cellular Ltd. declined 2.7 percent to 80 rupees. The benchmark Sensitive Index dropped 0.6 percent. Reliance Communications Ltd. gained 4.9 percent to 72.9 rupees.

The proposals would allow spectrum auctions and would limit a merged company to holding 25 percent of the available airwaves in a region, Chandrashekhar said. The country has 22 telecommunications zones.

Mergers between carriers that would have a combined market share of 35 percent or less would no longer need anti-monopoly approval under the proposed rules. Combined companies that would control between 35 percent and 60 percent of a zone’s wireless phone market would require such approval, according to the policy draft approved.

The National Telecom Policy, initially unveiled in October, would need cabinet clearance, with some portions requiring parliamentary approval.

Carriers need more spectrum to serve customers that reached 626 million in October.

The proposals may get final approval by June, according to a Dec. 23 review by the Department of Telecommunications.

--Editors: Subramaniam Sharma, Abhay Singh

To contact the reporter on this story: Ketaki Gokhale in Mumbai at kgokhale@bloomberg.net

To contact the editor responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net.


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