Idea gets Rs 600 cr penalty notice over Spice merger issue

According to the ministry, Idea violated rules as it held permits in zones where Spice had operations

Idea Cellular today said it has received a letter from Department of Telecom (DoT) imposing a penalty of Rs 600 crore for alleged violation of licence conditions in its merger deal with Spice Communications.

The DoT, however, said the merger of the operational Spice licences of Punjab and Karnataka can be taken on record if Idea pays up the penalty of Rs 600 crore within next 15 days, Idea Cellular said in a filing to the BSE.

 

The company is preparing to take necessary steps to challenge the DoT letter at appropriate forum, it said.

"Idea Cellular Limited has received a communication from DoT, Ministry of Communications & IT, on imposition of financial penalty of sum of Rs 600 crore for alleged violation of terms and conditions of CMTS /UAS licences while acquiring erstwhile Spice Communications Limited," the filing said.

As per the rules, a telecom operator cannot hold more than 10% stake in another operator in the same circle.

Spice Communications was amalgamated with Idea effective March 1, 2010, after approval of merger by the Gujarat High Court on November 26, 2009, and the Delhi High Court on February 5, 2010, the filing said.

It added the Delhi High Court passed an order on July 13, 2012, asking DoT to give its final decision on transfer of operational Spice licences of Punjab and Karnataka in the name of Idea.

"The DoT has written that the Department is prepared to take the merger of companies. On record and change the name of two Spice UAS licences of Punjab and Karnataka service areas subject to Idea paying financial penalty of Rs 600 crore besides other list of compliances within next 15 days," the filing said.

The DoT letter is dated November 29, 2013, it added.

In 2008, Idea Cellular acquired 41.09% stake in Spice Communications. The companies merged in 2010, which resulted in overlapping of licences in six circles.

At the time of the merger, both the companies had licences for Andhra Pradesh, Delhi, Haryana, Maharashtra, Punjab and Karnataka.

Meanwhile, the Supreme Court in its February 2012 order cancelled Idea Cellular's licences for Punjab and Karnataka circles, while Spice lost its licences for Andhra Pradesh, Delhi, Haryana and Maharashtra.

As a result, only Punjab and Karnataka licences are operational post the merger.