Monthly Archives: February 2014

Telecom Merger And Acquisitions (M&A) Guidelines 2014 Of India

Telecom Merger And Acquisitions (M&A) Guidelines 2014 Of IndiaTelecom stakeholders are all excited due to the recent developments that have taken place in the telecom sector of India. The fact is that telecom environment of India is fast changing and this has given rise to many unique opportunities for the stakeholders around the world.

Pro active polices and guidelines like electronic system design and manufacturing, merger and acquisition (M&A) guidelines, FDI policy for telecom sector of India 2014 (PDF), approval to establish two semiconductor wafer fabrication manufacturing facilities in India (PDF), etc have already been announced by Indian government.

The guidelines for merger and acquisitions of telecom companies in India 2014 (PDF) have also been issued and many international telecom companies have shown their interest in this regard. The M&A policy for the telecom sector were scheduled to be presented before the cabinet for approval on 27 February 2014.

Nevertheless, the background developments and exercises have already started in the telecom field. National and international telecom companies have started exploring partnership, join venture, acquisitions and M&A possibilities.

At the same time regulatory compliances have also significantly increased in India in the telecom related fields. For instance telecom due diligence compliances is required to be ensured by foreign investors and those interested in M&A with Indian companies. Further, telecom stakeholders exploring the M&A route must also comply with the Internet intermediaries requirements and cyber law due diligence requirements (PDF) as prescribed by the Information Technology Act, 2000 (IT Act 2000).

Taxation issues have been at the core of dispute between big telecom companies and Indian Government. For instance, companies having commercial presence in India were accused of violating the transfer pricing laws of India. Transfer pricing orders have already been issued against Vodafone and Shell India and Nokia has been accused of violating the income tax and transfer pricing laws of India.

There are provisions under the Income Tax Act for avoidance of tax by certain transactions in securities and avoidance of income-tax by transactions resulting in transfer of income to non residents. To further curb income tax avoidance and to check black money accumulation in foreign jurisdictions, Income Tax Overseas Units (ITOUs) of India in foreign countries would also be established.

The Telecom Merger and Acquisitions (M&A) Guidelines 2014 of India must be read subject to all these techno legal requirements. Companies looking forward to M&A would also take the rights and obligations of the merged entity. A wrong telecom due diligence compliance may saddle them with unnecessary legal and financial liabilities.