Change M&A norms to calculate spectrum dues: Trai
Firms to pay one-time fee from final DoT approval date for remaining licence period
New Delhi: The Telecom Regulatory Authority of India (Trai) on Friday proposed that the department of telecommunications (DoT) amend its mergers and acquisitions (M&A) guidelines for payment of spectrum charges.
The regulator said companies should be asked to pay one-time spectrum charges calculated from the date of the final DoT approval for the remaining period of the licence and not from the date of the National Company Law Tribunal’s (NCLT’s) approval.
DoT should calculate tentative demand from the date of NCLT approval and, upon grant of merger approval, the actual demand shall be recalculated on the basis of the date of grant of approval, the regulator proposed. This is because the government raises the demand for these charges before giving final approval.
The excess amount paid by the resultant merged entity, if any, shall be refunded or set off against other dues, said Trai.
If the government accepts Trai’s proposal, the merged entity of Vodafone India and Idea Cellular would receive some refund if it ends up paying DoT’s ₹3,900 crore cash demand for one-time spectrum charges.
DoT had on 9 July issued a letter of conditional approval for the merger with a demand of ₹3,900 crore in cash for transfer of unliberalized spectrum from Vodafone to Idea for airwaves up to 4.4 megahertz (MHz) and ₹3,300 crore in bank guarantees towards one-time spectrum charges arising on account of Idea’s unliberalized spectrum beyond 4.4MHz.
M&A guidelines state that the one-time spectrum charges to be paid by the acquiring company on account of transfer of airwaves up to 4.4MHz from the acquired company to the resultant merged entity are to be calculated on the basis of the difference between the entry fee and the market-determined price of spectrum from the date of approval of such arrangements by NCLT on a pro-rata basis for the remaining period of validity of the licence.
One-time spectrum charges are payable by companies which want to convert their administered spectrum or spectrum not bought in an auction to liberalized or auctioned spectrum. Auctioned spectrum can be deployed flexibly for any purpose, unlike administered spectrum.
“If this change in merger and acquisition guidelines is accepted by the government, this will effectively mean that companies will no longer be penalized for regulatory and bureaucratic delay. This would also mean that the merged entity of Vodafone and Idea may get some money back from the government in case they accept the government’s demand for dues. TRAI and DoT have correctly identified the discrepancy in the M&A guidelines and have arrived at a consensus on the best method to tackle it so that the companies are not charged in excess,” said Saurav Kumar, partner at IndusLaw.
Trai had in November sent to DoT its recommendations on “the ease of doing business in telecom sector” under which it has proposed that one-time spectrum charges be calculated from the date of written approval of merger of licences. DoT had then asked Trai to reconsider its view and had suggested that DoT raise the demand upon the acquiring company of these charges from the date of NCLT approval, with a stipulation that such demand is subject to revision after the grant of approval of transfer of licences by DoT. Trai has now backed DoT’s views and proposed the change in merger norms.