DoT asks TRAI to update M&A norms for telcos

The Department of Telecom (DoT) has asked TRAI for a new set of recommendations on M&As, working on Kapil Sibal's recent statement that the telecom sector requires consolidation. 

The move focuses on updating the M&A guidelines of April 22, 2008 announced by former telecom minister A Raja, which still govern the telecom sector. 

These norms allowed companies such as Swan, Unitech, Tatas and S Tel to issue fresh shares at a premium and diluting stake, one of the key areas of criticism of the policies followed in the Raja era.

Trai had earlier made recommendations on M&As in May 2010. The DoT has re-referred these to the regulator for a review. The DoT's key mandate for Trai is to harmonize M&A regulations with 'relevant and legal regulatory provisions'.

TRAI has also been asked to recheck its recommendations forbidding M&As if the number of service providers narrows down to below six in a circle.  DoT, now wants M&As to be ‘population based’ in each service area. This implies that the competitive threshold level could be lower for states in the North-East but much higher for Metros or A category circles. 

DoT wants terms like 'associates' and 'stakes' with respect to the substantial equity clause to be redefined and seeks for a system to accommodate M&A activity between 2G, 3G, and BWA spectrum holders.