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New Delhi, Feb. 21: The Indian telecom industry is set to witness a major shakeout with the government announcing today its final guidelines on intra-circle mergers which considerably dilute the rigid provisions that were proposed earlier.

In theory, the dilution of the guidelines means that even the two biggest players in a telecom circle could merge without violating any of the conditions or riders that have been proposed to ostensibly stop the emergence of a dominant player.

The guidelines for the merger and acquisitions by telecom companies within the same circle stipulate that any merger, acquisition or restructuring should not result in a operator having more than 67 per cent of the market share in the given service area. These guidelines can be reviewed after a period of one year, or earlier.

The subscriber base of the merging entities will be considered to determine market share. But the guidelines have cleverly diluted the tough conditions proposed earlier by stipulating that when two cellular players wish to merge, for instance, the total market share will be determined by taking into account all the cellular subscribers as well as the CDMA (or wireless in local loop) subscribers.

The pooling of the entire mobile subscriber base considerably lowers the market share of each player — and creates a situation where the two top players in a metro circle could, theoretically, merge without being tripped up by the 67 per cent market share criteria.

The new guidelines create a situation where a flurry of mergers and acquisitions could result in the emergence of just three or four operators in the country, analysts said.

Last year, the government had released the guidelines for the mergers of two telecom companies in two different circles. Today’s guidelines relate to mergers and acquisitions by telecom companies within the same circle.

According to a senior telecom analyst with PriceWaterhouseCoopers, “Since the mobile subscriber base will include the full mobile and the limited mobile users, the market share of full mobile operators prior to the unified access service licence (UASL) will drop. This would ensure that even if two big players in the same circle merge, the total subscriber base will not exceed 67 per cent.”

The government has stipulated that mergers and acquisitions will be allowed between cellular licence with cellular licence; basic service licence with basic service licence; unified access services licence (UASL) with unified access services licence; basic service licence with UASL and cellular service licence with unified access services licence.

In order to ensure that competition exists, the government has pointed out that after the merger, there should be a minimum of three operators in that area for that service.

T.V. Ramachandran, director general of Cellular Operators association of India, said, “We welcome the guidelines since it will help consolidation of the telecom market.”