High indebtedness of smaller telcos, their aged networks, operational and legal hassles have been obstacles to M&A. Under the new MVNO policy, the smaller telco can split itself into a MVNO + NSO [Network Services Operator] and house its revenues in the MVNO, sell that off to the acquiring telco, which can avoid the aforesaid hassles. The seller can retire part of debt and further continue efforts to monetize its spare capacity.
A key negative is that MVNOs will have to pay 13% LF [License Fees]+SUC - Spectrum Usage Charges even though they do not own spectrum. We believe DoT has put this in place to avoid arbitrage. The current regulation would not allow NSO?s own LF+SUC to be deducted from that which the MVNO has to pay. Hence, there would be double taxation and the structure would become inefficient.
No VNO and another telco (other than its parent telco) and a VNO and another VNO in the same service area shall have any beneficial interest (10% or more equity) in each other. Government, financial institutions and scheduled banks are exempt from this norm.
We think the DoT has made the MVNO also pay the LF+SUC to ensure that a telco does not sell minutes at a steep discount to an MVNO while the MVNO sells minutes to subs at market prices. In the absence of LF+SUC for MVNOs, telcos could take the above route and circumvent LF+SUC altogether. However this does not explain why the MVNO is not allowed a set-off for the LF+SUC paid by its NSO. That measure would have avoided double taxation.
