If India's operators had hoped new rules would allow the over-supplied market to consolidate and provide access to fresh spectrum, they must be sorely disappointed.
The current M&A rules forbid cellcos from buying more than a 10% in another company operating in the same circle - effectively ruling out any consolidation at all.
But under the TRAI's new scheme, announced last month, mergers will be limited to operators whose combined customer base is no more than 30% of a single circle.
It is an advance from the current rules, but means mergers between the larger operators will not take place. Rather, it lends itself to big players merging with small operators, such as fledgling GSM1800 operators.
The problem is that the GSM1800 start-ups don't bring anything to the table - few subscribers, large debt and no 3G spectrum.
The big players are not so interested in more 2G spectrum - what they really seek is more 3G spectrum to fill out network gaps.
me to"The M&A picture is more fragmented than before," said Ovum's Shiv Putcha. He believes that the GSM1800 operators may look to exit in the next two years, but if they are going to catch the eyes of the big incumbents, it follows that they will need some 3G.
The next 3G auction is probably some three to four years away.
Operators spent big on the sale of 3G airwaves last month.
All three or four blocks per circle of 2 x 5-MHz apiece were sold. Government-owned operators BSNL and MTNL already have 2 x 5-MHz each of 2100-MHz spectrum in their respective circles and have launched 3G services.
The biggest spender was Bharti which picked up spectrum in 13 circles, including Mumbai and Delhi, for $2.62 billion.
Vodafone bought frequencies in nine circles for $2.48 billion, followed by Reliance Communications, which successfully bid $1.83 billion for 13 regions. A year ago, Reliance estimated it could pick up spectrum in all 22 circles for just $1 billion at auction.
Aircel will also pay about $1.39 billion for 13 zones, while Idea Cellular won spectrum in 11 service areas for $1.23 billion.
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