TELECOMS,
MEDIA &
TECHNOLOGY
UPDATE
Following the recent amendments to the TA, IDA
has issued the TCC 2012, with the following
changes:
(a)
revisions to section 10 of the TCC, in
order to implement recent changes to
Part VA of the TA, which sets out the
legislative framework for acquisitions and
consolidations in the telecommunications
sector; and
(b)
various consequential amendments to the
TCC.
8 May 2012
IDA ISSUES
TELECOM
COMPETITION
CODE 2012 AND
NEW TELECOM
CONSOLIDATION
AND TENDER
OFFER
GUIDELINES
INTRODUCTION
With effect from 23 April 2012, the Telecom
Competition Code (“TCC”) 2012 has replaced the
TCC 2010. The TCC is the code of practice issued
by the Infocomm Development Authority of
Singapore (“IDA”) to govern competition and
market conduct in the telecommunications industry
in Singapore.
Latest version of the TCC
The Telecommunications Act (Cap. 323) (“TA”),
which is the main legislation governing the
telecommunications industry in Singapore, was
recently amended with effect from 1 February
2012. A summary of the changes to the TA can be
accessed here.
The key changes, as reflected in the revised
section 10 of the TCC 2012 (“Revised Section
10”), and other consequential amendments to the
TCC are summarised below.
New Section 10 Guidelines
In conjunction with the revisions to section 10 of
the TCC, IDA has also issued the new Telecom
Consolidation and Tender Offer Guidelines
(“Section 10 Guidelines”) to clarify the
implementation of section 10 of the TCC 2012.
The Section 10 Guidelines replace the previous
Telecom Consolidation Guidelines and Tender
Offer Guidelines.
SUMMARY OF CHANGES TO SECTION
10 OF THE TCC
Section 10 of the TCC sets out requirements to
notify or seek approval from IDA in relation to
acquisitions and consolidations in the
telecommunications sector. In general, the
acquisition of voting shares in a designated
telecommunications licensee (“DTL”), units in a
designated business trust (“DBT”), or equity
interests in a designated trust (“DT”), as well as
voting power in a DTL/DBT/DT, may require IDA to
be notified or IDA’s approval to be granted,
depending on the threshold being exceeded (as
further set out below).
Inclusion of Designated Business
Trusts and Designated Trusts, in
addition to Designated
Telecommunication Licensees
One significant change to section 10 of the TCC is
that in addition to DTLs, it will now apply to
transactions involving DBTs and DTs. DTLs, DBTs
and DTs are entities that are designated by IDA
pursuant to section 32A(2) of the TA.
whether or not based on legal or
equitable rights, of that
percentage of the total number
of votes that may be cast in a
general meeting of [the DTL,
DBT or DT], as the case may
be”.
Previously, the TCC 2010 only applied to
transactions involving DTLs. Typically, DTLs are
corporations. However, IDA recognises that some
telecommunication operators may use other
business entities such as trusts or business trusts
to structure ownership of their telecommunication
systems or assets, and there is a need to ensure
that such entities are included under the
telecommunications acquisitions and
consolidations review framework.
Essentially, the concept of voting power allows IDA
to take into account the actual control held by a
party over a DTL, DBT or DT, instead of only
examining the percentage of voting shares held by
an acquiring party in each entity.
Under the Telecommunications (Designated
Telecommunication Licensees) Notification 2012,
IDA has declared the following to be DTLs:
The following illustration from the new Section 10
Guidelines demonstrates the concept of voting
power:
(a)
all facilities-based operator (“FBO”)
licensees; and
(b)
services-based operator (“SBO”)
licensees PacNet Internet (S) Pte Ltd and
Syniverse Technologies (Singapore) Pte
Ltd.
IDA has also stated in its cover note to the TCC
2012, that where the trustee-manager of a
business trust or trustee of a trust has been
declared as a DTL, IDA will declare the relevant
business trust or trust as a DBT or DT.
Introduction of the concept of
“voting power”
Under the TCC 2010, IDA had used the concept of
ownership interest (both direct and indirect) that an
acquiring party held in a DTL, as calculated using
the “sum-the-percentages” methodology, to
determine the acquiring party’s ownership interest
in a DTL.
Under the TCC 2012, IDA will take into
consideration the “voting power” controlled by a
party, when determining whether a party has
crossed the notification/approval thresholds. As
defined in the TCC 2012, voting power is:
“control that is direct or indirect,
including control that is
exercisable as a result of or by
means of arrangements or
practices, whether or not having
legal or equitable force and
“If entity A is in a position to
control 12% of the Voting
Shares/Voting Power in a
Licensee, and entity B holds
30% or more of the Voting
Shares/Units/Equity Interest or is
in a position to control 30% of
the Voting Power in entity A, IDA
will presume that entity B is in a
position to control 12% of the
Voting Power in the Licensee.”
In contrast, under the previous framework using
the sum-the-percentages methodology, entity B
would be deemed to have a 3.6% indirect
ownership interest in entity A.
Introduction of the concept of
“Associates”
In line with the revisions to Part VA of the TA, the
concept of “Associates” has been incorporated into
the Revised Section 10. Consequently, the
requirement to seek IDA’s approval for acquisitions
will depend on the shares/units/equity interests or
voting power held by a person together with his
Associates.
The term “Associates” is broadly defined under
section 32A(4) of the TA. The definition includes
relatives (spouses, parents, remoter lineal
ancestors, step parents, children, remoter issue,
step-children, siblings or step-siblings); related
corporations; corporations whose directors and
persons who are accustomed or under an
obligation to act in accordance with the directions
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of the first-mentioned person; as well as persons
who have an agreement or arrangement to act
together with respect to the acquisition, holding or
disposal of shares, units or other equity interests
in, or with respect to the exercise of voting power
in relation to, a DTL, DBT or DT.
Notification and approval
thresholds under the Revised
Section 10
interest or is in a position to control 30% or more of
voting power in a DTL/DBT/DT.
The concept of effective control remains similar as
under the TCC 2010. Effective control is defined
as the ability to cause the DTL, trustee-manager of
a DBT, or trustee of a DT to take, or to refrain from
taking, a major decision regarding the
management or operations of the DTL/DBT/DT.
Prescribed transactions
Notification required
Approval required
Certain prescribed transactions (listed below) are
subject to reduced notification/approval
requirements. In accordance with sections 32B(9)
to (13) of the TA, prescribed transactions that
would otherwise need IDA’s approval would only
need to be notified to IDA, while prescribed
transactions that would otherwise need to be
notified to IDA would not need to be so notified.
A DTL, a trustee-manager of a DBT and a trustee
of a DT, together with every acquiring party, must
seek IDA’s approval where an acquiring party:
As set out in the Telecommunications (Prescribed
Transactions) Order 2012, a prescribed
transaction is a transaction which:
(a)
becomes a 12% controller;
(a)
(b)
becomes a 30% controller;
(c)
acquires any business of a DTL/DBT/DT
that is conducted pursuant to a
telecommunication licence granted by
IDA, or any part of any such business, as
a going concern; or
(d)
obtains effective control over a
DTL/DBT/DT.
A DTL, trustee-manager of a DBT, and a trustee of
a DT must notify IDA where a transaction results in
a person holding voting shares/units/equity interest
or being in control of voting power of at least 5%
but less than 12%.
results in the transfer of shares, units or
equity interest in a DTL/DBT/DT:
(i)
from any person to a
corporation, any shares in which
are owned or any voting power
in which is controlled by that
person, without any change in
the percentage of the voting
power in the DTL/DBT/DT
controlled by that person;
(ii)
from a corporation to any of its
shareholders, without any
change in the percentage of the
voting power in the DTL
controlled by that shareholder;
(iii)
from a corporation to its wholly
owned subsidiary, or to a
corporation from its wholly
owned subsidiary; or
(iv)
from one corporation, any
shares in which are owned or
any voting power in which is
controlled by any person, to
another corporation, any shares
in which are owned or any voting
The concept of 12% controller and 30% controller
has been modified slightly from the TCC 2010 to
incorporate the new concepts of voting power and
Associates.
A 12% controller is defined as a person who, alone
or together with his Associates, holds 12% or more
but less than 30% of the voting shares/units/equity
interest or is in a position to control 12% or more
but less than 30% of voting power in a
DTL/DBT/DT.
Similarly, a 30% controller is defined as a person
who, alone or together with his Associates, holds
30% or more of the voting shares/units/equity
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power in which is controlled by
that person, without any change
in the percentage of the voting
power in the DTL/DBT/DT
controlled by that person; or
(b)
does not change the percentage of the
voting power in the DTL/DBT/DT
controlled by every person who controlled
any voting power in the DTL/DBT/DT
immediately before the transaction.
Timelines
Previously, IDA was empowered to impose
financial penalties of up to S$1m. Under section 8
of the revised TA, this limit has now been revised
to the higher of either:
(a)
S$1m, or
(b)
10% of the annual turnover of a
licensee’s business in respect of which
the licensee was granted the licence.
Section 11.4.4.4 of the TCC has been amended to
reflect this change.
In general, notifications should be made to IDA
within 7 days after the DTL, trustee-manager of a
DBT or trustee of a DT (as the case may be) first
becomes aware of the triggering events requiring
notification.
Transitional provisions
Where approval is required for a transaction, IDA’s
approval should generally be sought not less than
60 days before the completion of a transaction. In
addition, where acquiring parties enter into an
agreement (not amounting to an open market
transaction) for the transaction, applicants are
required to seek IDA’s approval within 30 days
from the time the agreement is entered into.
(a)
all directions and notices issued by IDA
under TCC 2005 or TCC 2010 will
continue to be effective, as if approved
under TCC 2012;
(b)
any acts done or agreements made by a
person before, but which continue after,
the issuance of TCC 2012, will be
governed by TCC 2012 from its effective
date;
(c)
in respect of contraventions by any
person under earlier versions of the TCC,
that person will remain liable under the
relevant version of the TCC as if it had
not been revoked;
(d)
proceedings commenced (but
uncompleted) before the issuance of TCC
2012 will be governed by TCC 2012, so
long as they are consistent with the
provisions of TCC 2012. Where IDA is
unable to determine a proceeding as
being consistent with TCC 2012, the
proceeding will be withdrawn and a new
proceeding may be initiated under TCC
2012; and
(e)
reconsiderations / appeals on the above
proceedings that arise after the TCC
2012 comes into effect, will be heard
under TCC 2012.
The review period in which IDA will decide whether
to give approval for a transaction remains
unchanged. IDA will ordinarily complete its review
within 30 days. Notwithstanding, in exceptional or
complex cases, IDA may extend the review period.
To ensure smooth transition between previous
versions of the TCC and the TCC 2012, IDA has
provided for the following:
Obligation to monitor changes in
voting shares / voting power
Similar to the TCC 2010, the TCC 2012 requires
DTLs to adopt reasonable procedures for
monitoring changes in their voting shares and
voting power. Similarly, trustee-managers of DBTs
and trustees of DTs must adopt reasonable
procedures for monitoring changes in units/equity
interests and voting power.
CONSEQUENTIAL AMENDMENTS TO
THE TCC
Revised financial penalties
In accordance with the recent revisions to the TA,
IDA’s powers to impose financial penalties for
contraventions of the TCC have been expanded.
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REFERENCES
Please click on the following links to access the
documents.
1.
The Telecom Competition Code 2012.
2.
The Telecom Consolidation and
Tender Offer Guidelines.
________________________________________
If you have any questions or comments on this
article, please contact:
Lim Chong Kin
Director
Head, Telecommunications, Media & Technology
Practice Group
T : +65 6531 4110
E: chongkin.lim@drewnapier.com
The content of this article does not constitute legal advice and should not be
relied on as such. Specific advice should be sought about your specific
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