The Telecom Regulatory Authority of India ("TRAI")
will soon to be coming out with M&A guidelines. Union cabinet
has approved setting up of two Semiconductor Wafer Fabrication
(FAB) Manufacturing Facilities in India under the National
Electronics Policy of 2012.
1. Telecom M&A guidelines to be in place
The Telecom Secretary MF Farooqui has announced that M&A
guidelines for the telecom sector should be out within the next ten
days. The Empowered Group of Ministers (EGoM), which has approved
the guidelines, has sought legal opinion on whether consolidation
of companies would amount to sale of equity, violating the lock-in
period rule of the telecom license. As per the guidelines
approved by the EGoM, the market share of a merged entity should
not exceed 50%. Telecom companies that bought spectrum in auctions
won't have to make additional payments to the government for
radiowaves after a merger. Only companies that acquire telecom
operators that had been allocated spectrum will have to pay the
difference between the market rate and the old rate to the
PSA view - M&A will serve as another way in
which spectrum can be acquired.
2. Government to set up semiconductor fabrication units
Union cabinet has approved setting up of two Semiconductor FAB
Manufacturing Facilities in India under the National
Electronics Policy of 2012. Jaiprakash Associates Limited will set
up the first FAB in Yamuna Expressway, Uttar Pradesh with IBM, USA
and Tower Semiconductor Limited, Israel as partners while HSMC
Technologies India Pvt. Ltd will set up the second FAB in Prantij,
Gujarat with ST Microelectronics and Silterra Malaysia Sdn. Bhd. as
partners. Letter of intent will be issued to the parties by March
31, 2014 and it is expected that the final agreements will be
signed by August 2014. These projects have been offered 25% subsidy
on capital expenditure and tax reimbursement as admissible under
Modified Special Incentive Package Scheme (M-SIPS) Policy,
exemption of Basic Customs Duty (BCD) for non-covered capital
items, 200% deduction on expenditure on R&D as admissible under
Section 35(2AB) of the Income Tax Act, among others. India's
first chip characterization lab is proposed to be set up in
Bangalore jointly by the Karnataka
government, STPI and IESA, which will test a
design to see if it meets its goals. It is also a process that
happens before it is sent to the fab for manufacturing.
PSA view - FABs will have a big impact on the
development of Electronics System Design and Manufacturing
eco-system in India by stimulating the flow of capital and
technology, creating employment opportunities, helping higher value
addition in the electronic products manufactured in India, reduce
dependence on imports, and leading to innovation.
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