Idea Cellular Ltd on Tuesday said it has received a letter from the Department of Telecom (DoT), asking the operator to pay a penalty of Rs 600 crore for alleged violation of licence conditions in its merger deal with Spice Communications.
The DoT has asked the operator to pay the fee within 15 days if it wants approval for the merger. The company is expected to challenge the penalty in court. An internal review committee set up by the DoT had earlier upheld the penalty.
The case dates back to 2008 when Idea Cellular acquired Spice’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 at the root of the problem. Under licence rules, an operator cannot own a stake exceeding 10 per cent in another operator in the same circle.
Idea Cellular had blamed the DoT for delaying the resolution of the issue despite the company’s offer to unconditionally surrender the overlapping licences way back in 2008.
The Delhi High Court had earlier stayed the merger between Idea Cellular and Spice on a complaint filed by the 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 companies could not have merged operations until January 2011.