The Cellular Operators Association of India (COAI), the industry body representing GSM operators has approached the Ministry of Telecommunications and IT to relax merger and acquisition (M&A) norms to encourage consolidation in the telecom sector.

In a recent meeting with Ravi Shankar Prasad, Minister of Telecommunications and IT, COAI highlighted several issues impacting the telecom sector including high taxation, excessive penalties and regulation and lack of access to spectrum. Besides COAI officials, the meeting was attended by Gopal Vittal, chief executive officer (CEO), Bharti Airtel and Himanshu Kapania, CEO, Idea Cellular.

While interacting with the minister, COAI pointed out that the guideline that mandates the resultant entity to make payment of differential between the market determined price of spectrum and the administrative price for the administratively allocated spectrum held by the acquired entity, was a key dampener for M&A deals. The industry body has requested the government to reconsider this clause.

Further, COAI has urged the government to reconsider the issue of retrospective taxation. In 2012, the former government under the United Progressive Alliance changed income tax laws to allow the government to tax companies retrospectively. Following the change in law, the government raised a demand of Rs 200 billion (including penalties and interest) from Vodafone Plc on the grounds that it did not pay taxes while acquiring Hutchison Essar’s operations in India.

Besides, the issue of retrospective taxation, the GSM industry body has sought auction of all available spectrum across bands at the earliest. It has also pushed for the allocation of spectrum auctioned in the last round of auction conducted by the government in February 2014. Further, COAI has recommended introduction of a flat spectrum usage charge, which, at present, is measured through a weighted average of spectrum bought before and after the auctions.