Now that we have a clear Spectrum Policy (Auction is the only way), Mergers & Acquisition is something that will come in the limelight along with interconnect fees as the new Government takes over. In this backdrop, incumbent Vodafone is already exploring Merger / Acquisition with Tata DoCoMo which is strategically the best fit in the new entrants.
What are the current M&A Guidelines in Telecom ?
The combined market share of a merged entity is capped at 50% in each circle (up from 35% being discussed previously). There is a spectrum cap of 50% in a given band, and 25% of the entire spectrum available in the access area. However, if the acquirer and the acquired companies both have had won one block of 3G spectrum each in the 2010 auctions, then they are allowed to retain both of these. Spectrum, if excess, needs to be surrendered within a year.
For recent auctions, the lock-in period has been fixed at three years from the date of allotment of spectrum or until the fulfillment of all the roll‐out obligations, whichever is later. (Tata DoCoMo stayed away from the Auction).
Vodafone Acquisition of Tata DoCoMo will not violate any of the above guidelines except for Spectrum breach in Tamilnadu circle. The following Chart shows the Revenue Market Share, Subscriber Market Share and Spectrum Holding of the combined entity.
Vodafone’s Tax Battle with erstwhile Congress Government which did the filthy & unthinkable of amending tax laws with retrospective effect and Tata DoCoMo’s bleeding balance sheet can be possible hurdles in the deal. Mukesh Ambani’s Reliance Jio Infocomm could also be a potential bidder for Tata DoCoMo and could easily block Vodafone’s counter bid. Any thoughts ?