New Delhi: India’s fifth largest mobile phone services firm, Idea Cellular Ltd, offered to surrender licences for operating mobile phone services in Punjab and Karnataka if this becomes a regulatory hurdle in its proposed merger with Spice Communications Ltd.
Idea, a firm belonging to the AV Birla group of companies, has also asked for the licence fee charged by the government’s department of telecommunications, or DoT, to be returned. On 25 June, Idea Cellular said it will buy out B.K. Modi’s 40.8% stake in Spice Communications, which operates mobile services in Karnataka and Punjab.
The deal also included joining hands with Telekom Malaysia International Bhd for this venture and Idea issued a public offer for purchasing another 20% stake in Spice Communications.
According to a letter written by Sanjeev Aga, managing director of Idea Cellular, to DoT on 15 July, the company had asked the department to consider the licences for Karnataka and Punjab, to have been surrendered, if it does not approve of the merger. The other option Idea Cellular has offered is to separate the two licences to another company, in which it will have equity of less than 10% in keeping with telecom mergers and acquisitions rules in India.
“Both Idea and Spice are existing operators and there are no overlapping licence operations,” Aga said in the letter reviewed by Mint. “Clause 17 of the merger guidelines is unclear whether one or both the licences have to be older than three years to qualify for merger of licences.” The rule Aga referred to, part of guidelines issued by DoT in April, says any permission for a merger shall be accorded only after three years from the effective date of licences. Idea Cellular received the Karnataka and Punjab licences in February.
When asked whether DoT will be considering any action on the Idea Cellular-Spice merger deal, DoT secretary Siddarth Behura said on 15 July he was “yet to examine the papers”.
‘Business Standard’ on Monday reported that DoT had raised questions over the proposed merger violating rules in the telecom sector.
A telecom analyst said an operator could surrender the licence back to the government. “It will not be a violation (of guidelines),’” said Alok Shende, principal consultant with Acceindia Consulting. R. Jai Krishna