The Additional Solicitor General of India has held Idea Cellular in violation of the merger and acquisition norms and has suggested stringent penalties including a Rs 300-crore fine, withdrawal of 3G spectrum in four circles and cancelling 2G licences in six circles.
The proposed penalty is for allegedly violating merger and acquisition norms when the Aditya Birla Group company bought equity stake Spice Telecommunication in 2008.
In his opinion sent to the Department of Telecom, Mr A.S. Chandhiok, the ASG of India, has faulted the deal between Idea Cellular and Spice for violating 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.
In this case, four new licences were issued to Spice and two to Idea Cellular on January 25, 2008. Hence the two could not have merged operations until January 2011.
The ASG has also blamed the company for flouting the substantial equity clause according to which a single company cannot hold more than 10 per cent equity stake in two different telecom entities operating in the same circles.
The deal in 2008, wherein Idea picked up 41.09 per cent stake in Spice, resulted in a situation where there were six overlapping circles in which both the companies held licences. The ASG has suggested cancelling the new licences in these six circles of Delhi, Maharashtra, Andhra Pradesh, Haryana, Punjab and Karnataka.
However, this may not have any major impact on Idea's operations because the new licences are non-operational and it is offering mobile services in these circles under old licences issued in 1995-96. But the company will be asked to pay a fine of Rs 50 crore for each circle for the said violations.
In addition since Idea has won 3G spectrum in four out of the six circles, DoT has been advised to withdraw the 3G spectrum since the licence itself is being cancelled.