DoT panel suggests spectrum transfer fee for M&A

Merger and acquisition in the Indian telecom market could become expensive if the recommendations of the committee set up by the Department of Telecommunications to review spectrum allocation policy are accepted. Under the recommendations a mobile operator acquiring spectrum from another pan-India mobile operator would have to pay as much as Rs570 crore per mhz to the government as transfer fee.

The five member committee has suggested that operators be asked to pay a transfer charge ranging between Rs57 crore and Rs2.5 crore per mhz for various circles, in the case of a merger or acquisition.

 The committee finalised its report and submitted it to the DoT on Wednesday. It has recommended the highest transfer charge Rs 57 crore per mhz for Tamil Nadu and the lowest for Bihar at Rs2.4 crore per mhz.

This means that if a company acquiring another mobile operator with a minimum of 4.4mhz spectrum would have to pay Rs2,500 crore to the government. This is even exceeds the Rs1,600 crore paid by operators for acquiring the start-up spectrum.

The committee has said that the transfer charges should be discounted by 20 per cent for one year from the date of announcement of policy. The charges would be payable only for the first transfer or merger and only on that quantum. The prescribed fee is applicable for a 20-year period with a pro-rate reduction on the basis of number of years remaining. Thus in the case of an acquired company being an old licencee the fee would reduce proportionately.

Acquisition of a new licencee would be more expensive and the spectrum assigned through auction for which the market price has been paid will attract no transfer charges.

The committee has also suggested imposition of a one-time spectrum fee on existing operators with spectrum in excess of 6.2mhz in any circle. The fee will be covered through 3G auction price which would mean that if the government collected Rs4,000 crore from auctioning 5mhz or 3G spectrum, existing operators would have to pay up Rs800 crore for each unit of spectrum beyond 6.2mhz.

The committee has also recommended the existing system of subscriber based criteria be done away with and all fresh spectrum be auctioned.

Operators who have a licence will be granted 4.4mhz start up spectrum for GSM and 2.5mhz for CDMA beyond which no player would get additional spectrum by way of subscriber based criteria.