Idea slapped Rs 600 cr fine for merger of Spice Comm

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Idea Cellular on Tuesday informed the stock exchanges that it had received a letter from the department of telecommunications demanding Rs 600 crore in financial penalties for violating telecom licence norms while acquiring Spice Communications a few years ago. The telecom firm will challenge the order.

The stock slipped slightly to close 0.3 per cent lower at Rs 175.05 on BSE, as traders and investors largely ignored the development. “Idea is preparing to take necessary steps to challenge the DoT letter at an appropriate forum,” the company’s stock exchange announcement said.

“The decision was long pending. We don’t see it impacting the stock movement as the firm will appeal against the order,” Harit Shah, senior research analyst at Nirmal Bang Equities, told Financial Chronicle.

“There have been some expectations that the telecom commission will soon come up with lower penalty slabs for service providers violating government norms. Telecom minister Kapil Sibal had recently expressed concerns on penalties, saying the issue needs to be resolved,” said Ankita Somani, telecom analyst at Angel Broking

“Any change in the penalty slabs would be positive for all operators,” said Shah. Under the telecom licence agreement, an operator cannot own more than 10 per cent stake in another operator of the same service area or circle either directly or indirectly. When Idea Cellular merged Spice Communications with itself, it acquired the licences for six circles from Spice where Idea already held licences. Two of these six licences of Spice — Punjab and Karnataka — were operational at the time of acquisition and, thus, the merger was seen as violation of norms.

As per Idea Cellular, the company had received the approval for merger from the Gujarat high court in November 2009 and Delhi high court in February 2010. A division bench of Delhi high court in July 2012 had directed the department of telecommunications to give its final decision on the transfer of operational Spice licences in Punjab & Karnataka to Idea.

DoT on Saturday last week informed Idea Cellular that it was ready to take the merger of the two companies on record and change the name of two Spice UAS licences in Punjab and Karnataka service areas, subject to Idea paying a financial penalty of Rs 600 crore besides other compliances within next 15 days.

The stock had scaled new highs between July and October, hitting an all-time closing high of Rs 184.95 on October 14. The Supreme Court in a ruling in 2012 had cancelled Idea Cellular’s licences for Punjab and Karnataka circles. On the other hand, four of Spice’s circles that were non-operational (Andhra Pradesh, Delhi, Haryana and Maharashtra) were also cancelled. Including Punjab and Karnataka, a total of nine Idea licences were quashed in 2012.

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