Telco Roundup: M&A Guidelines; TRAI Recommends Increase In FDI In News Broadcasting

– The DoT has issued M&A Guidelines for telecom licenses, stating that no merger and acquisition will be allowed if as a result of which the number of service providers reduces below four in a circle. Additionally, the combined market share of the merged entity should not exceed 40 per cent of the subscriber base or in terms of revenue. As for spectrum, the merged entity will be entitled to the total spectrum held by all merging entities. However, failure to meet the spectrum allocation criterion within 3 months will cause the post merger Licensee to surrender the excess spectrum. The guidelines effectively seal the possibility for the current biggies to harvest new licensees for precious spectrum, if anything, it encourages new licensees to consolidate. I wouldn’t expect big telco dominated COAI to be waxing eloquent about the new regulations anytime soon.

Guidelines available here

— The TRAI has proposed an FDI hike from 49 percent to 74 percent in the cable TV network sector, citing the high cost for upgrading current infrastructure. This has direct ramifications on broadband penetration as an estimated Rs. 64,000 crore is required for upgrading 80 million cable homes in the country. The upgrade of cable infrastructure will allow triple play services (voice, TV and data services).

Nothing new in case of Mobile TV, TRAI has reiterated its 74 percent FDI recommendation. Additionally, foreign investments upto 49 percent may be permitted under the automatic route, beyond which FIPB approval would be required. Fancy predictions regarding Mobile TV have been going around since April, everything but the service has yet to start with DD drawing a complete blank on issues of terrestrial transmission. As for content services, recommendations for the FDI limit for news & current affairs channels as well as FM radio has been hiked from 26 percent to 49 percent.

The full recommendations available here (pdf)

Nikhil adds: The most significant recommendation here is the increase in FDI limit for news and current affairs channels from 26 percent to 49 percent. Here’s why: foreign investment in media in India has been largely in the non-news segment, which are not governed by a foreign direct investment limit of 26 percent, which governs news businesses. Thus, many media entities has been forced to separate their news and non-news (or as NDTV calls it – news and “beyond news”) businesses to attract foreign investment.

A change in this policy means that many media companies, like NDTV, UTV, INX and Network18 can raise more money their news businesses from the likes of Disney (NYSE: DIS) (invested in UTV), NBC Universal (NYSE: GE) (invested in NDTV Networks), Turner (invested in Miditech), Reuters (NSDQ: RTRSY) (split with Times Now recently) etc. The other significant factor is that these guidelines are for news broadcasting; in order to maintain parity between print and TV news businesses, there may be a case for increasing foreign investment in the print news sector as well, since some, like HT Media are reportedly also entering the news broadcasting space with Mint TV.

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