Comments
Denying any breach of merger and acquisition (M&A) norms, Aditya Birla group firm Idea Cellular today said the company’s merger with Spice Communications was approved by court and consummated with the full knowledge of the Department of Telecom.
The company’s reaction comes a day after the Additional Solicitor General of India held that it was in violation of M&A norms and suggested imposition of stringent penalties, including Rs 300-crore fine, withdrawal of 3G spectrum in four circles and cancellation of 2G licences in six circles.
“The Idea and Spice merger, since approved by the courts, happened to involve six overlapping licences. Despite being issued spectrum for five of these, it is Idea which advised the DoT that it was not using such spectrum; in effect, placing overlapping licences in a de facto escrow pending receipt of the DoT’s formal letter of merger, including surrender, if at all that was attracted,” Idea Cellular said in a statement.
Idea Cellular held overlapping telecom permits in six telecom circles after its acquisition of Spice Communications in October 2008. Spice Telecom had permits to operate in six regions —— Punjab, Karnataka, Andhra Pradesh, Delhi, Haryana and Maharashtra —— but was only offering services in Punjab and Karnataka.
Reacting sharply to the news, the shares of Idea Cellular plunged 7.14 per cent to touch a low of Rs 58.50 today. Later on, they made a marginal recovery and were trading at Rs 60.10 apiece, down 4.6 per cent, on the Bombay Stock Exchange.
“The court merger was consummated with the full knowledge and support of the DoT, over a year ago. For reasons incomprehensible, the DoT has so far not issued merger letter in consonance with the court-approved merger,” it said.
The Additional Solicitor General, Mr A.S. Chandhiok, said the deal between Idea Cellular and Spice Communications had violated 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.
Idea Cellular contended that it asked for merger of the licences as per guidelines, which “incidentally yields the company nothing beyond the incumbent licence original entitlement, merger or no merger.”
The company noted that it had paid an entry fee of Rs 843 crore for the overlapping licences, maintained BGs of Rs 350 crore, but has derived no benefit.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.