Guidelines for merger of licenses in a service area

The Government had indicated earlier that the Intra-Circle Mergers and Acquisitions in the telecommunications industry shall be permitted and the detailed guidelines would be issued in due course. The Department of Telecommunications ("DoT"), under the Ministry of Communications and Information Technology has notified the "Guidelines for merger of licenses in a service area" vide Office Memorandum No.20-232/2004-BS.III, dated 21st February 2004 ("guidelines") after considering various recommendations from the Telecom Regulatory Authority of India ("TRAI") and the industry. The salient features of these guidelines include:

1. After obtaining approval from the DoT, licenses within the following categories and operating within the same service area will be allowed to merge. The categories include

• Cellular License with Cellular License
• Basic Service License with Basic Service License
• Unified Access Services License ("UASL") with Unified Access Services License
• Basic Service License with UASL
• Cellular License with UASL

2. In the case where a basic service license has merged with UASL, the basic service license shall be required to pay the difference of amount of the entry fee as per the guidelines released earlier for migration to UASL dated 11th November 2003.

3. The licence of merged entity will be approved based on the condition that at least three operators will operate within a particular service area providing a particular service, even after the merger and that the UASL will be regarded as a Basic as well as a Cellular service provider separately while deciding the number of operators in a particular service area.

4. The merger would not be permitted if the merged entity would constitute 67% or more of the total market share in a particular service area. This market share would be calculated based on the last day of the previous month, based on the Exchange Data Records for fixed subscribers (i.e. wire-line subscribers and fixed wireless subscribers) and Home Location Register and Exchange Data Records for mobile subscribers. Incase of UASL, the total subscriber base of mobile as well as fixed subscribers will be taken into account.

5. The spectrum for service allocated to the merged entity shall not exceed 15 MHz per operator for a particular service area for metros and category 'A' service areas, and 12.4 MHz for category 'B' and category 'C' service areas. The total merged spectrum amount will be retained as the starting point and will serve as the basis for further allocation in due course.

6. The spectrum use charges beyond 10 + 10 MHz for GSM-based services and 5 + 5 for CDMA based services would be prescribed separately.

7. The merged entity will retain the discretion to choose the band to surrender beyond the limits prescribed above.

8. All past dues shall of the merging entities in that particular service area will need to be cleared before merging.

Previously, the telecom service providers could not acquire spectrum from other service providers from the same circle as there was no guidelines for merger of licences. However, this liberalization will accelerate growth of telecom service providers by enabling large service providers to merge with smaller entities.