The Department of Telecom (DoT) may approve the merger of Spice Telecom’s cellular licences with Idea Cellular, but with riders. The Department will give its approval on the condition that Idea Cellular pay a penalty if the Government finds the merger has violated merger and acquisition norms.
The case dates back to 2008 when Idea Cellular acquired Spice Telecom’s operations, including licences held by Spice for six circles, two of which (Punjab and Karnataka) were commercially operational. Idea too had been awarded licences for all of those six circles and had spectrum in five, including Punjab and Karnataka. This overlap of licence areas was the root cause of the problem. Under licence rules, an operator cannot own stake exceeding 10 per cent in another operator in the same circle.
However, market watchers said the DoT approval now may not mean much to Idea Cellular, as four of the six licences held by Spice were quashed by the Supreme Court in February 2012.
The Delhi High Court had earlier stayed the merger between Idea Cellular and Spice Telecom on a complaint filed by DoT. The Additional Solicitor-General of India had also held Idea Cellular to be in violation of the lock-in period clause, which stipulates that a company cannot enter into an agreement for merger for three years from the effective date of licence. In this case, new licences were issued to Spice and Idea Cellular on January 25, 2008. Hence, the two could not have merged operations until January 2011.
Idea Cellular had blamed DoT for delaying resolution of the issue despite the company offering to unconditionally surrender the overlapping licences way back in 2008.