In India's apex policy-making body in the sector, the Telecom Commission, has directed the department of telecom (DoT) to prepare an exit policy for operators. In an interview, J.S. Sarma, the chairman of the Telecom Regulatory Authority of India, has said that the Indian government is considering the regulator's views on the new M&A rules as part of a broad telecom policy to be announced soon.
Huge amount of valuable spectrum will find flow back to DoT in case the government goes ahead with an exit policy for telecom operators.
Even though India is touted as the world's second-largest telecom market with more than 850 million users, operators are bleeding due to stiff competition that has kept tariffs at rock-bottom levels. Competition intensified from 2008 when licenses were given to seven new companies, doubling the number of operators in most areas.
Some of the older players like Airtel, Vodafone, Idea and Reliance have raised their tariffs marginally in the recent months, but the newer players dont have such pricing power and they continue to loose large sums of money. Analysts expect the new policy to provide newer players an exit route and bigger players the opportunity to add to their user base.
According to sources, TRAI has proposed up to six operators in a service area, compared with as many as 14 now, a market share of up to 30% for a merged company and a bandwidth cap higher than specified in the current rules. J.S. Sarma feels bullish on the future prospects despite the problems that the telecom sector is facing.
While it is still too early to assess the likely contours of the exit policy, analysts are of the opinion that any new policy must examine and deal with all loopholes, even labour laws if applicable. The firms might be allowed to sell out, or surrender their licences. But one thing is for sure. Any directive by TRAI is bound to result in heated discussion and intense lobbying before the policy is finalized.
J S Sarma also offered an opinion on the new 4G technology, which promises Internet speeds at least five times faster than typical 3G networks. Sarma said that the sector needs at least 500 megahertz of additional bandwidth by 2015 to keep pace with growth. The additional spectrum could fetch about $218.81 billion for the government.
The auctions conducted last year had left the government richer by about $22 billion. It is being expected that an exit policy for ailing telcos could be unveiled close to the Union Budget of 2012-13.
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