DoT wants 10% cap on crossholdings to stay

The Department of Telecom (DoT) has rejected a key recommendation of the telecom regulator Trai that aimed to increase the threshold cap of equity crossholdings to 20 per cent by the same promoter in two separate companies offering services in the same licence area.

It has also refused to relax the existing cap on the total spectrum that a merged telecom entity can possess.

However, the DoT has agreed to limit the combined market share of a merged entity at 40 per cent in terms of subscribers as well as gross revenue.

The views are likely to be finalised soon by the full Telecom Commission, a multi-ministry body that formulates telecom policy. A meeting in this regard has been scheduled. The Commission, chaired by the DoT secretary, has the powers to overrule the department's views.

The Telecom Regulatory Authority of India had recently sent a set of recommendations to the DoT aimed at a new licensing framework for existing second generation mobile networks in the country. Among other wide ranging recommendations, some of which had set off a firestorm of protest from the mobile operators' community, Trai had suggested amending existing norms with regard to regulating acquisitions of equity stakes by the same promoter or entity in other telecom service providers.

It had wanted that acquisition of an equity stake of up to 10 per cent of the target company be permitted automatically, and beyond that till 20 per cent, on a case by case basis.

The DoT's views, seen by Business Standard, reiterate the existing 10 per cent limit and said the same promoter company cannot have stakes beyond this limit in more than one licensee company for the same service area.

Crucially, officials have said that excess spectrum held by the merged entity (beyond 15 Mhz in metros and 12.4 Mhz per operator per service area elsewhere) would have to be surrendered within six months or else the annual spectrum charge might be levied at twice the prescribed rates for the total spectrum held by the entity.

The DoT has also said no to relaxing the clause that threatens an operator with licence termination if he defaults in meeting network rollout obligations.

However, it has agreed with the Trai on encashing the bank guarantee of such an operator and refusing to allocate him any more spectrum till he catches up on the network rollout front.

Of the 19 recommendations with regard to mergers and acquisitions and attendant issues, DoT has accepted a majority (around 10), while rejecting some outright and partially accepting others.