Permit spectrum trade,M&As will follow: Vodafone

While pointing out problems with the M&A policy,Pieters said he would not buy the company on offer even if the M&A norms were liberalised. “I (Vodafone) may just want to buy 3G spectrum in circles where I don’t have these high-speed radio waves. I may not want to buy the tower assets of the company,I have 1,15,000 of my own. But current norms do not allow you to buy just the spectrum. A lot of acquisitions are waiting to take place; once rules allow you to sell assets,you don’t need the merged entity.”

He said that though the new telecom policy has endorsed spectrum trading,there has not been any follow-up action by the government.

With regard to the M&A policy in the works,Pieters said it was restrictive since it put a low ceiling on how much spectrum a merged entity could hold — the 25 MHz proposed by Trai is still lower than that held by most global players who have much smaller subscriber bases.

The other major irritant is the spectrum usage charge. “The more spectrum you have,the more you have to pay to the government,even if you have bought it through market-determined prices,” Pieters said.

He said the government should either not levy spectrum usage charge or keep it at a flat rate. Currently,the spectrum usage charge is 3-8 per cent of the operators’ adjusted gross revenue.

For instance,it starts at 3 per cent of the AGR for spectrum up to 4.4 MHz. As the spectrum holding increases to 6.2,8.2,10.2,12.2 and 15.2 MHz,the charge also increases by a percentage point each,going up to 8 per cent of the AGR.

What that does,Pieters said,is to knock out a lot of value when you look at M&As. If a company has to pay,for instance,8 per cent of AGR after a merger as compared to 3 per cent now,it is going to look the M&A quite unfavourably.