Five telecom stocks rose by 0.09% to 2.91% at 12:09 IST on BSE after a panel of ministers on Tuesday, 3 December 2013, approved crucial changes to the rules on mergers and acquisitions in the fragmented telecom industry.
Bharti Airtel (up 1.32%), Idea Cellular (up 0.09%), MTNL (up 1.36%), Tata Teleservices (Maharashtra) (up 2.91%) and Reliance Communications (up 1.22%) gained.
The S&P BSE Sensex was down 52.30 points or 0.25% at 20,802.62
Telecom stocks edged higher after a panel of ministers on Tuesday, 3 December 2013, approved crucial changes to the rules on mergers and acquisitions in the fragmented telecom industry, raising the cap on the market share of a merged entity in a circle to 50% from 35% earlier.
The rule change could trigger a much needed consolidation in the country's crowded telecom sector. "The M&A rules have been approved," Communications Minister Kapil Sibal told reporters after a meeting of the empowered group of ministers, headed by finance minister P Chidambaram. The Cabinet is expected to meet shortly to ratify the changed rules. Under the new guidelines, an operator will be entitled to only one block of spectrum which had been allotted at an administrative price, or without an auction process, Sibal said. The merged entity would need to pay the market price for any additional bandwidth beyond that one block.
While the three-year lock in period clause before a sale of equity for a license holder continues, the telecom department will seek legal opinion on whether telecom operators can merge within that period. A merger would entail an equity dilution and not a sale of equity.
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The panel also decided that a total of 403 Mhz of spectrum be auctioned in the 1800 Mhz band in the auctions scheduled for January. That amount of spectrum would be worth around Rs 36000 crore, as per the price cleared at the previous EGoM meeting. On Tuesday, the government also decided to allow a merged entity to hold up to two blocks of 3G and broadband wireless access (BWA) spectrum as against one block each currently. It has also decided to retain the spectrum cap of a merged entity at 25% of total airwaves assigned for access services and 50% of the bandwidth assigned in a given band, by way of auction or otherwise, in the concerned service area.
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