The Economic Times reports that India’s Department of Telecom is considering easing merger and acquisition rules “so significantly that it will leave only around six operators in any service areas,” with each operator having at least 10MHz of spectrum at its disposal. Apparently the regulator, under Kapil Sibal, the Minister of Telecom, is also considering how to ensure the investments made by smaller operators can be protected in the case of an acquisition, although it was suggested that this may make transactions less appealing to larger operators – the need to protect existing investments could make acquisitions too expensive. The proposals could be included in a telecom policy consultation which is scheduled for April 2011.

One of the main drivers for consolidation is likely to be the demand for spectrum from the larger operators. While the country has a number of new entrants holding 2G spectrum allocations, these have largely failed to gain traction – meaning that they are holding frequencies which are not being fully used. The relaxation of the rules looks set to encourage in-country mergers, rather than being designed to increase investment in the country from overseas. It was suggested that the ongoing 2G licensing scandal, which has focused on investments made in the country from overseas, may have limited the appeal for international players, although companies that are already active in the market, such as Vodafone Group and NTT DoCoMo (through Tata Teleservices), may look to drive further consolidation.