Market Share Cap Post M&A
The telecom regulator had lots of questions pertaining to mergers and acquisitions, and the criteria for calculating the market share of a service provider in a service area. As per the existing guidelines, any M&A that leads to a market share of 67% or more, of the merged entity, is not permitted. What should be the ideal market share that can be termed as dominant in an M&A scenario, and how it can be calculated? Views of telecom associations and players are different.

AUSPI, Tata Teleservices, and Reliance Communications feel market power is an economic concept and a function of not only concentration but also of demand elasticity, supply elasticity of rival firm, market share of competitive firms and their reactions, and differences in cost and risk. "We consider that for determining the dominance in the market, Audited Adjusted Gross Revenue (AGR) and subscriber base criteria should be considered to calculate the market share of a service provider in a service area. The number of subscribers should be based on exchange data records (EDR) and visitor location register (VLR)," says SC Khanna, secretary general, AUSPI.

However, Reliance Communications and Tata Teleservices, key members of AUSPI, differ on the maximum market share of 67% that determines the dominance as per the present guidelines. For Reliance Communications, which feels that the existing limit of 67% market share with the merged entity can threaten competition and public interest, 40% should be the market share cap in terms of AGR and user base, whereas Tata Teleservices proposes a cap of 75%.

The GSM association-COAI, Bharti Airtel, and Vodafone Essar-are happy with the present 67% market share for a merged entity, and that subscriber base should be the criteria for them.

The state-run BSNL, the largest telecom operator in India by revenues, wants that the limit should be brought down to about 40% as the existing provision of 67% market share will create a non-competitive/monopolistic situation, while for MTNL, which has operations in Delhi and Mumbai, the market share cap of 67% should be reduced to 50%.

According to RS Perhar, secretary, ISPAI, the monopoly market situation should be defined as the market share of more than 25% subscriber base in a service area or more than 25% of the total adjusted gross revenue earned from wireline or wireless subscribers in that service area.

Spectrum Cap Post M&A
Now each individual operator is entitled to receive as much as 15 MHz spectrum upon achieving pre-defined subscriber milestones. Under these circumstances, to apply the same limit of 15 MHz to M&A, as is applicable to an individual operator, would be incorrect and deter any M&A activity from taking place. "The Indian market has not sufficiently matured to a point where spectrum caps can be removed completely, but we do believe that there is a very strong case for an upward revision of the maximum spectrum limit," says TV Ramachandran, director general, COAI.

According to Tata Teleservices and Reliance, an existing ceiling of 15 MHz for the merged entity is appropriate and sufficient to meet the requirements and as such should be maintained as per the existing provisions in the M&A guidelines. The ceiling of 15 MHz of the merged entity will apply for all sorts of mergers.

MTNL suggested 15 MHz for GSM-GSM merger, while 10 MHz should be the cap for CDMA-CDMA merger. Vodafone Essar feels that spectrum caps are an unnecessary layer of restrictions on M&A and can create anomalous situations which could act against consumer interest.

Regarding the minimum number of operators in each circle, by and large all operators are echoing the same sentiment. They want the existing policy of at least three players operating in each circle post M&A should continue.

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