India announced guidelines for mergers and trading of spectrum among wireless carriers, opening the door for operators, including including Vodafone Group Plc and Bharti Airtel Ltd., to bolster airwave assets.
The rules cap a merged entity’s market share at 50 percent per service area, according to the document published on the Department of Telecommunications’ website today. Carriers have a one-year window to adhere to the limit in the event of a combination resulting in a larger share.
The government outlined rules as 13 carriers fight for market share in the world’s second-largest mobile market by subscribers. Bharti, India’s largest operator, announced Feb. 18 it would acquire Loop Mobile India Ltd. to add about 3 million users to its base after separately spending 185.3 billion rupees on spectrum in India’s 610 billion rupees ($9.8 billion) sale that ended last week.
“This is a move in the right direction,” Rajan Mathews, Director General of Cellular Operators Association of India, an industry lobby, said in a phone interview. “But more than sparking a flurry of deals, I think this policy opens the door to spectrum trading as a more cost-efficient alternative.”
The rules allow carriers of third-generation, or 3G, spectrum, auctioned by the government in 2010, to exceed the 50 percent cap if the additional airwaves are acquired through trading or an outright purchase. The government did not give details of how the spectrum usage charges, a one-time payment for leasing the airwaves, would be calculated.
The government also provided a clause to charge carriers for acquiring airwaves allocated by India outside of an auction. Companies will have to pay the difference between the original price and that determined by subsequent auctions, on a pro-rata basis dating back to 2010, according to the rules.
“The policy offers clarity, which the industry must be grateful for,” said Harit Shah, a Mumbai-based analyst with Nirmal Bang Equities Ltd. “But it also opens the door for new options. I think carriers will wait to see what the government’s future plans are for a spectrum sale before anyone makes any huge strategic moves.”