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Our Bureau

New Delhi, Aug. 11 Aditya Birla Group-backed Idea Cellular may lose as much as Rs 350 crore if it wants to fructify its proposed acquisition of equity stake in Spice Communication.

The Department of Telecom on Monday said that the company will have to surrender its licence in Punjab and Karnataka without getting a refund of entry fee paid for these circles to avoid overlapping of service areas.

While Idea Cellular had recently got licences for the two areas, Spice has been offering mobile services there. According to existing merger and acquisition rules, a single company cannot hold more than 10 per cent stake in two different telecom firms in the same circle. Idea Cellular had announced in June that it was acquiring 40.8 per cent stake, held by B K Modi Group, in Spice for Rs 2,700 crore. However, DoT norms do not permit acquisition in overlapping areas.

“Policy is very clear. What will one do with two licences? You need just one to offer the service. Obviously, Idea has to return one licence (in each circle) but there wouldn’t be any refund for this,” Mr Sidhharth Behura, Secretary, Department of Telecom, said on the sidelines of an event.

Idea Cellular had earlier approached DoT seeking clarity on the issue. One of the options being discussed within the company was to demerge the second licence in Punjab and Karnataka into a separate company in a bid to override the M & A rule. The company had told DoT that it was also open to surrendering one set of the licences but hoped to get a refund of the entry fee paid.

Idea Cellular had reported a 14.7 per cent decline in net profit to Rs 263.1 crore in the first quarter of this financial year due to forex losses and higher interest charges. The Rs 350-crore notional loss may put additional burden on the company’s financials. Idea Cellular would have coughed up nearly Rs 3,500 crore for the acquisition, including the Rs 543.97-crore it paid as a non-compete fee to the BK Modi Group.

DoT’s decision also means that the B K Modi Group may also stand to lose money it paid for acquiring licences in Delhi, Andhra Pradesh, Haryana and Maharashtra circles as Idea Cellular already has operations in these circles.

More Stories on : Telecommunications | Mergers & Acquisitions | Regulatory Bodies & Rulings | Idea Cellular Ltd

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