The empowered group of ministers ( EGoM) on telecom, headed by Union finance minister P. Chidambaram, on Tuesday cleared the merger and acquisition (M&A) policy for the telecom sector raising the market dominance criterion to 50 per cent of the market share in terms of subscriber base.
In a merger, the resultant entity has to pay market rates for holding spectrum above 4.4 MHz that was allotted to the companies administratively at old rates.
If two entities which are merging hold airwaves purchased through auctions, they will not have to pay market rate for spectrum, sources said, adding that it has also been decided to put a cap on spectrum a final entity can hold in an area.
However, the merging companies will have to comply with the lock-in clause for sale of equity.
The telecom sector's first M&A rules paves ways for consolidation in the Indian telecom market where there are about 12 players including Bharti Airtel, Vodafone, BSNL, Tata Teleservices, Videocon and Aircel.
"The M&A guidelines have been finalised and the quantum of spectrum that will be put up for auction in the 2G band has also been finalised," Telecom Minister Kapil Sibal said after the meeting.
According to sources, the EGoM has approved sale of 403.2 Megahertz of 2G spectrum in 1800 Mhz frequency band, which at the base price finalised by the ministerial panel amounts to about Rs 36,385 crore.
The EGoM in its last meeting had also approved sale of premium spectrum in 900 Mhz band in three metros- Delhi, Mumbai and Kolkata held by licences of Airtel, Vodafone and Loop Mobile that are due to expire in last quarter of 2014.
The total quantum of spectrum getting freed in the three metros is about 46 Mhz, which amounts to about Rs 12,300 crore at the base rate finalised by the EGoM in its last meeting.
Together, the 900 Mhz and 1800 Mhz band airwaves are valued at about Rs 48,685 crore.
The government in the Budget has provisioned about Rs 41,000 crore from spectrum revenue, which included upfront money from auction and various fees levied on airwaves used for commercial mobile communications.