Along with the one-time spectrum charges, the Cabinet also approved the M&A policy. This policy suggests that if the acquiring company holds spectrum against the entry fee paid, then the resultant entity would have to pay to the Government the difference between the auction-determined price and the entry fee paid earlier.
This key policy move eliminates the probability of a large new entrant that could be formed by acquiring spectrum from smaller regional operators at lower than auction rates. Given that the company would have to pay the high reserve price in any case, it would not be at any advantage compared with other new operators. Hence, this operator would behave as rationally/irrationally as other newer operators would and this route is unlikely to steer any further increase in tariff competition.
Should Small Operators Consolidate ?
Barring Airtel, Vodafone and Idea, all other operators have a sub-10% market share. If the smaller operators, such as RCom, Tata, Aircel and BSNL/MTNL, are unable to gain further market share and reach a desired scale, they could slowly consolidate with the bigger players. What say ?