The Department of Telecommunication (DoT) is currently working on framing an exit policy for the telecom sector in the country. The new policy will allow the companies to exit the sector without losing out on the value of assets that they have accumulated over a period of time.
Currently, there are a slew of regulatory approvals and guidelines which come into play regarding the transfer of assets of a company when it is looking to exit the concerned sector. So the DoT wants to setup a separate framework for the telecom sector to overcome all these hurdles. This move has come into place because the Government wants the telecom sector to be seen as an investor-friendly one which allows for ease of entry and exit from the country.
The move comes after the Loop Mobile service provider of Mumbai wanted to exit and Bharti Airtel wanted to acquire its business but the deal couldn’t go through due to the current regulations. The business was being sold for Rs 700 crore using a slump sale model (where a lump sum is paid without evaluation of assets and liabilities) but the deal couldn’t be approved because slump sale is not a part of the country’s telecom policy.
TRAI has told the company to offer its customers MNP instead of shifting them to Airtel right away.
Here’s what an internal DoT memo reads as, “as of now, only way available to the Licensee to exit the sector is by way of surrendering of Licence and spectrum. Today, transfer of business, slump sale is also a common market mechanism. Spectrum sharing and trading cannot be an answer to all exit policies. However, such valuations are beyond Licensor (DoT) jurisdiction and can be a source of creative accounting. Even with spectrum trading, the authorisations are not transferred.”
The internal note clearly mentions that it is difficult to exit the telecom sector and as a result many investors may hold back in future from coming to India. But if the new policy comes into effect, things may change for the betterment of the telecom sector.
Via: Live Mint