Loud buzz

New Delhi, Sept. 2: Big players in the telecom industry may now find it easier to take over smaller firms as the Telecom Regulatory Authority of India (Trai) has proposed to relax norms for mergers and acquisitions.

“The cap on post-merger spectrum of 15Mhz has been ruled out and bigger players now have an incentive to buy out small operators in an industry facing serious spectrum crunch,” said Alok Shende, vice-president (ICT, South Asia) of Frost and Sullivan.

If Vodafone-Essar buys BPL Mobile’s Mumbai operations, it can keep the entire spectrum the deal brings in. Both Vodafone and BPL have 10Mhz each in Mumbai and the merged entity will have 20Mhz of spectrum. Easy merger norms will also encourage firms that do not have spectrum in certain areas to take over smaller players in those circles.

“The government is unable to provide spectrum to Idea Cellular to start operations in Mumbai. The company could, therefore, look at the possibility of acquiring BPL Mobile, which operates in Mumbai. Such an acquisition will allow Idea to enter the metro and also get a ready subscriber base of more than a million,” said Sudipto Basu, senior analyst of EXL Services.

Depending on their ability to compete against incumbents, some of the smaller players could face a squeeze in margins, which would eventually force a consolidation in the medium to the long term, Basu said.

Trai has suggested that an acquisition of equity capital of up to 10 per cent by one telecom player in another operator in the same circle should be allowed through the automatic route.

Anything above that and up to 20 per cent should be approved on a case-by-case basis. “Such a move will encourage players such as Idea, Spice and Vodafone-Essar, which do not have a pan-India presence, to buy stakes in other operators within the same circle,” said Basu.

However, industry experts feel increasing the cross-holding cap to 26 per cent, which would provide a controlling stake to the buyer, would have made M&As more lucrative.