Trai moots reforms in merger norms for telecom licences spanning market share math, approval modalities

In a bid to reform norms for transfer and merger of telecom licences, Trai on Friday suggested that while both subscriber base and revenue are considered in determining market share for mobile and internet service providers, only revenue should be taken into account in market share calculation for other services like national and international long distance telephony.

The sector regulator also suggested that the one-year timeline currently allowed for transfer/merger of licences in different service areas after National Company Law Tribunal nod should exclude time spent by companies in pursuing any litigation on account of which the final approval of a merger is delayed.

Trai recommended that the guidelines on transfer/merger of licences should not 'hard-code' (that is, explicitly specify) the spectrum caps. Instead, it should be linked with the relevant clause of the licence, it said.

The Telecom Regulatory Authority of India (Trai) has now released its recommendations on reforming the guidelines for transfer and merger of telecom licences, after the telecom department in May 2019 sought its views on enabling simplification and fast-tracking of approvals.

Trai's suggestions range from market share math to approval timelines, and other terms.

Trai noted that the guidelines should be seen in the backdrop of consolidation in the market from 12-14 service providers a decade ago to four operators now, the National Digital Communication Policy's thrust on speedy approvals and the delays in mergers being taken on record.

"The authority recommends that for computing market share of an NSO (Network Service Operators) in the relevant market, market share of the VNO (virtual network operator) parented with it should be added to the market share of NSO, if the NSO is a promoter of VNO," Trai said.

The virtual network operators can provide telecom services like mobile landline, internet, but only as a retailer for full-fledged telecom operators.

"For calculation of one year that is time period allowed for transfer/merger of various licenses in different service areas subsequent to the approval of the Tribunal/Company Judge, the time spent in pursuing any litigation on account of which the final approval of a merger is delayed, should be excluded," Trai said.

This would protect the rights of a telecom operators to pursue remedies in court and also ensure that the period of one year does not become redundant for no fault of companies on account of pendency of an issue before a court, one of the stakeholders cited by Trai had submitted.

Another provision of the acquisition guidelines which provides an exemption from substantial equity/cross holding clause for a period of one year or more should be modified such that the said exemption is provided only for a period till transfer/merger of licence is taken on record by the licensor (telecom department), Trai recommended.

It also suggested that both the number of subscribers as well as Adjusted Gross Revenue (AGR) should be considered for determining the market share in case of services like access, internet and VSAT. And that only AGR should be considered for determining the market share for rest of the services like national and international long distance, and resale of international private leased circuits.

The authority recommends that guidelines should explicitly mention that consequent upon payment of market determined price for spectrum, such spectrum would be treated as liberalised, that is technology neutral.

Trai has also reiterated its earlier recommendation that if a transferor company holds a part of spectrum which has been assigned against entry fee, the resultant entity should be liable to pay differential amount for the spectrum assigned against the entry fee paid by the transferor company, from the date that the Department of Telecom (DoT) approves the transfer/merger.

"However, while raising the demand for payment of differential amount, DoT shall calculate tentative demand from the date of NCLT approval, and upon grant of merger approval, the actual demand of differential amount shall be re-calculated based upon the date of grant of approval. Excess amount paid...if any, shall be refunded back to the transferee company/resultant entity or set off against other dues," it said.