Idea to receive notices, faces Rs 300-crore fine

The department of telecommunications will serve notices to Idea Cellular this week on the termination of licences for violation of cross-holding norms in six circles, following the merger with Spice Communications in October 2008. Idea will also be fined around Rs 300 crore for similar violations in other circles, a senior DoT official confirmed.

To be terminated are four new licences of Spice and two new licences of Idea, where neither company has launched mobile services. In circles where services have been launched, a penalty will be imposed, the official added.

The decision is in line with suggestions made by the additional solicitor general last week, after its opinion was sought by DoT on the Idea-Spice deal. The ASG stated that Idea had violated DoT norms by holding over 10 per cent stake in two mobile firms in the same circle and recommended cancelling the overlapping licences.

However, Idea in a statement issued today denied any violation of norms. “The Idea-Spice merger, since approved by the courts, happened to involve six overlapping licences. Despite being issued spectrum for five of these, it is Idea that advised DoT that it was not using such spectrum, in effect, placing overlapping licences in a de facto escrow pending receipt of DoT’s formal letter of merger, including surrender if at all that was attracted. The company has paid Rs 843 crore entry fee, and maintained bank guarantees of Rs 350 crore, but has derived NIL benefit.”

“For reasons unknown, DoT has, so far, not issued a merger letter. The company has asked for merger of licences as per guidelines, which incidentally yields the company nothing beyond the incumbent licence entitlement… driven to the wall by this inert approach of DoT, Idea has approached the telecoms tribunal for succour, where the matter is currently pending,” the statement added.

However, Idea Cellular's shares fell by as much as 7 per cent in intra-day trading on the BSE today. By the end of the day, the stock recovered and ended 4.8 per cent lower than the previous close at Rs 59.9 a share.

Idea had been demanding a refund of entry fees after surrendering its licenses, but DoT did not accept its demand.

At the time of acquisition, Spice Communications had licenses for the Punjab, Karnataka, Andhra Pradesh, Delhi, Haryana and Maharashtra circles, but offered services only in two circles: Punjab and Karnataka.

Idea had merged the Punjab and Karnataka circles with itself, as it was not offering mobile services in these circles. However, it did not use its own licenses and spectrum for these circles.