The Hindu Business Line : DoT may seek Ministry help for verifying new applicants

Identity check
Plans to put in place a lock-in period for about three years to retain equity structure.
No merger or acquisition would be permitted during the lock-in period and also till the roll-out obligations are met.

Thomas K. Thomas

New Delhi, Oct. 10 In a bid to prevent violation of cross holding norms by companies which have recently applied for new telecom licences, the Department of Telecom is considering to seek the help of Ministry of Corporate Affairs to verify the identity of the actual promoters behind the applicant firms.

As per DoT norms, no single promoter can hold equity in more than one telecom company in a single circle. Concerns have been raised that some of the companies, which have put in their applications for a licence, may be acting as proxies for existing operators.

“Since DoT is not an expert in this matter, it is being proposed that a list of all existing operators and new applicant companies with their shareholding pattern may be forwarded to the Ministry of Corporate Affairs. They can examine whether any of the applicants violate the substantial equity criteria or check if the source of funding is doubtful,” said a DoT official.

In order to weed out any non-serious players, DoT is also looking to put in place a lock-in period for about three years during which the applicant company cannot change the equity structure.

No merger or acquisition would be permitted during the lock-in period and also till the roll-out obligations are met. The department may impose a severe punitive measure in case the roll-out obligations are not met.

TRAI suggestions

On the telecom regulator’s recommendations for additional spectrum allocation, DoT officials said that the Government is likely to accept the suggestion that there be a cap at 10 Mhz per operator for GSM players and 5 Mhz for CDMA operators beyond which the operators may be asked to pay a charge.

DoT may also accept TRAI’s suggestion to increase the subscriber base required to be eligible for additional spectrum. However, it may also put a cap on spectrum in the event of a merger between two companies.

While TRAI had not recommended any such cap, DoT officials said that this may adversely boost the asset value of the merged entity against the interest of other operators.

M&A norms

Further tightening the merger and acquisition norms, DoT may not allow any two companies whose combined market share is more than 30 per cent. TRAI had suggested that this limit be raised to 40 per cent.

An internal DoT document, however, suggests that any operator who already has more than 30 per cent stake may not be allowed to merge with any other unified access service provider in the same circle.

DoT may also continue with the existing norms for preventing cross holding, which do not allow any single company to hold more than 10 per cent stake in two different telecom operators in the same circle. TRAI had suggested that up to 20 per cent may be allowed on a case by case basis.

On the issue of mixed technology by a single company, DoT officials said that if any operator wants to offer both GSM and CDMA based services, then it may be asked to pay a one-time entry fee if the total quantum of spectrum held by the company is more than 15 Mhz.

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