A formal merger & acquisition (M&A) policy for India’s telecommunication sector is expected to be tabled before the Cabinet for final approval by next week, according to media reports. The development, which would allow telecom firms to acquire a direct rival in the same circle of operation, is expected to open up a series of consolidation moves in the sector.
At present, new telecom firms are allowed to buy stake in existing telecom firms. Also, a telecom firm is allowed to buy another telco which does not offer services in the circle where the acquirer is present. However, there are restrictions on intra-circle M&As or deals between telecom operators in same circle.
The policy liberalisation would allow some firms to sell their business to a rival in same circle; it will also allow a national player to sell to an existing pan-India telecom service provider.
However, the acquirer and the target, together, should not have more than 50 per cent market share in any circle.
The new norms would help Bharti Airtel seal its recently announced deal where it plans to acquire Loop Telecom in Mumbai to become the top player in the city.
Media reports have previously suggested Tatas are looking to exit the telecom business and the M&A norms would allow the group to sell Tata Teleservices to an existing telco in the country.
India’s telecommunication industry is the world’s
second-largest telecom market by subscribers but in some circles there are far too many operators compared with the global average. Competition and costs of infrastructure have also led to many of them piling up under debt.
The industry is set for a consolidation and in a recent report Fitch Ratings said the number of operators will come down to six-seven from 12 as those at the bottom look to exit, due to lack of sufficient spectrum and financial muscle to remain viable.
(Edited by Joby Puthuparampil Johnson)