M&A norms shuts out existing players

The new mergers and acquisition guidelines issued by the Department of Telecom seems to have disturbed the calculations of service providers. For starters the three-year lock-in period, mentioned in the new guidelines, will only be applicable in the case of mergers.
This means that companies including Datacom (owned by Videocon), Unitech and BPL will be allowed to offload up to 74 per cent equity to foreign companies as per the existing FDI norms or 100 per cent stake to any non-telecom Indian companies. But they will not be able to sell out to existing Indian companies. Both Datacom and Unitech have begun scouting for an international partner. This paves the way for foreign players such as AT&T, which will be able to acquire a controlling stake in any of the new licence holders such as Unitech or even operators such as Aircel and Idea Cellular, which have a mix of new and old licences. And since AT&T knows that the number of buyers aren't too many, it can quote a lower price. But existing pan Indian telecom players such as Airtel and Vodafone will, however, not be able to acquire equity in any of these companies. According to the M&A norms, no entity can have equity stake of more than 10 per cent in two different companies. So if Airtel wants to pick up more than 10 per cent stake in Datacom then it will not be able to do so. Both Airtel and Vodafone had shot off a month ago that the new players would be sitting ducks for them to acquire. After the final guidelines were announced Airtel's Sunil Mittal turned around and said that they were not interested in acquisitions in India anymore and are looking at international markets. The ring tones have surely changed.