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Idea Cellular denies breach of M&A norms

Idea Cellular denies breach of M&A norms
PTI
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First Published: Tue, Feb 22 2011. 01 26 PM IST
Updated: Tue, Feb 22 2011. 01 26 PM IST
New Delhi: Denying any breach of merger and acquisition (M&A) norms, Aditya Birla group firm Idea Cellular on Tuesday said the company’s merger with Spice Communications was approved by court and consummated with the full knowledge of the Department of Telecom (DoT).
Idea’s reaction comes a day after the Additional Solicitor General of India (ASGI) held that the company was in violation of merger and acquisition (M&A) norms and suggested the imposition of stringent penalties, including a Rs300 crore fine, withdrawal of 3G spectrum in four circles and cancellation of 2G licences in six circles.
“The Idea and Spice merger, since approved by the courts, happened to involve six overlapping licences. Despite being issued spectrum for five of these, it is Idea which advised the DoT that it was not using such spectrum; in effect, placing overlapping licences in a de facto escrow pending receipt of the DoT’s formal letter of merger, including surrender, if at all that was attracted,” Idea Cellular said in a statement.
Idea Cellular held overlapping telecom permits in six telecom circles after its acquisition of Spice Communications in October, 2008. Spice had permits to operate in six regions -- Punjab, Karnataka, Andhra Pradesh, Delhi, Haryana and Maharashtra -- but was only offering services in Punjab and Karnataka.
Reacting sharply to the news, shares of Idea Cellular plunged 7.14% to touch a low of Rs58.50 on Tuesday. Later on, they made a marginal recovery and were trading at Rs60.10 apiece, down 4.60%, on the Bombay Stock Exchange (BSE).
“The court merger was consummated with the full knowledge and support of the DoT, over a year ago. For reasons incomprehensible, the DoT has so far not issued merger letter in consonance with the court-approved merger,” it said.
ASG A. S. Chandhiok said the deal between Idea Cellular and Spice had violated the lock-in period clause, which stipulates that a company cannot enter into an agreement for merger before three years from the effective date of licence.
Idea contended that it asked for merger of the licences as per guidelines, which “incidentally yields the company nothing beyond the incumbent license original entitlement, merger or no merger.”
Idea Cellular noted that it had paid an Rs843 crore entry fee for the overlapping licences, maintained BGs of Rs350 crore, but has derived no benefit.
“Over the last 30 months, Idea has pursued the matter with 20 letters and a half-dozen meetings, to which a deaf ear has been turned. No licence condition has remotely been breached, indeed it could not have been. It is Idea which is the aggrieved party and driven to the wall by the inert approach of the DoT and has approached the TDSAT for succour,” it said.
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First Published: Tue, Feb 22 2011. 01 26 PM IST
More Topics: Idea | Cellular | M&A | Merger | DoT |