Creating a Regulatory Space: Spectrum Trade Deal and the Competition Commission of India

Exhibit 1: Details of the Telecom Sector in India as on April 30, 2018

India was the world’s second-largest telecom market, having more than 1.1 billion subscribers. With about 98% of the subscribers, the wireless segment (mobile) dominated the market. Private TSPs dominated the telecom market, having about 89% of the market share. 1

Source: https://main.trai.gov.in/sites/default/files/PRNo68Eng26062018.pdf

* Vodafone and Idea were in the process of merging their businesses.

** Telenor was in the process of merging its business with Airtel.

*** Tata Teleservices was in the process of merging its wireless business with Airtel.

Exhibit 2: Key Reforms and Developments in the Sector

Sources: https://iimlibrariesconsortium.ac.in/assets/snippets/workingpaperpdf/705538772015-03-22.pdf, https://www.financialexpress.com/industry/dot-notifies-spectrum-trading-guidelines/150715/, https://pib.gov.in/newsite/PrintRelease.aspx?relid=183741

Exhibit 3: Spectrum-Trading Guidelines

DoT issued trading guidelines in October 2015. The following are the details of the guidelines: 2

• a.
  Only outright sale. Leasing was not allowed.
• b.
  Block sizes for trading were specified and linked to the band. The block size for trading in the 2300-MHz band was 20 MHz in the TDD mode, whereas the block size for 900- and 1800-MHz bands was 2 × 200 kHz.
• c.
  For transactions involving only part sale, both the buyer and seller would have to meet the entire roll-out obligations associated with that spectrum. If, however, the buyer had met a part of its obligation through its earlier spectrum holding, then such a roll-out would be considered towards the buyer’s roll-out obligation for the traded spectrum.
• d.
  Only the access spectrum could be traded, as that was the only spectrum available through auctions.
• e.
  Trading could happen only across the entire service area.
• f.
  The original validity period of the licence would apply to the traded spectrum.
• g.
  The seller is required to clear all dues before concluding any agreement for the spectrum. Any dues recoverable after the effective date of the trade would be the liability of the buyer. If any amount is found recoverable after the effective date of the sale, then it would be at the government discretion to decide to recover it from either the seller or the buyer or jointly.
• h.
  The buyer should comply with the spectrum caps declared from time to time for the total spectrum available after the trade.
• i.
  The spectrum could be traded only after two years of its acquisition.
• j.
  The seller needed to clear all the SUC payable until the effective date of the trade.
• k.
  The amount received from trading would be counted against the AGR of the buyer to calculate both the licence fee and the SUC.

Exhibit 4: Company Profiles of RCom and RJio

Exhibit 5: Definition of Combination 12

Any acquisition, merger or amalgamation that meets the jurisdictional thresholds, as provided in Section 5 of the Competition Act, 2002 (Act), is a “combination” for the purpose of the Act. The thresholds relate to the assets and turnover of the parties to the combination, i.e., the target enterprise and acquirer (or acquirer group)/merging parties (or the group to which the merged entity would belong). 13

Broadly, a combination under the Act means acquisition of control, shares, voting rights or assets; acquisition of control by a person over an enterprise where such a person has direct or indirect control over another enterprise engaged in competing businesses; and mergers and amalgamations between or among enterprises when the combining parties exceed the thresholds set in the Act. The thresholds are specified in the Act in terms of assets or turnover in India and abroad.

Entering into a combination that causes or is likely to cause an appreciable adverse effect on competition within the relevant market in India is prohibited, and such a combination shall be void.

Source: https://www.cci.gov.in/sites/default/files/whats_newdocument/Revised%20thresholds.pdf

Exhibit 6: CCI’s Framework for Assessing Appreciable Adverse Effect on Competition in the Relevant Market 15

CCI would assess whether the combination would have the effect or is likely to have an appreciable adverse effect on competition in the relevant market, by examining all or any of the following factors, namely:

• a.
  actual and potential level of competition through imports in the market;
• b.
  extent of barriers to entry into the market;
• c.
  level of combination in the market;
• d.
  degree of countervailing power in the market;
• e.
  likelihood that the combination would result in the parties to the combination being able to significantly and sustainably increase prices or profit margins;
• f.
  extent of effective competition likely to sustain in a market;
• g.
  extent to which substitutes are available or are likely to be available in the market;
• h.
  market share, in the relevant market, of the persons or enterprise in a combination, individually and as a combination;
• i.
  likelihood that the combination would result in the removal of a vigorous and effective competitor or competitors in the market;
• j.
  nature and extent of vertical integration in the market;
• k.
  possibility of a failing business;
• l.
  nature and extent of innovation;
• m.
  relative advantage, by way of the contribution to the economic development, by any combination having or likely to have appreciable adverse effect on competition;
• n.
  whether the benefits of the combination outweigh the adverse impact of the combination, if any.

Exhibit 7: Timeline of Events

Source: https://www.cci.gov.in/sites/default/files/Notice_order_document/C-2017-06-516_Public%20version.pdf and https://www.cci.gov.in/sites/default/files/Notice_order_document/Order%20-%20553.pdf