High Court Stays Idea-Spice 2008 Merger

The communications ministry has obtained a stay from the Delhi High Court on the 2008 merger between mobile phone companies Idea Cellular and Spice Communications, inviting a ferocious backlash from the Aditya Birla Group firm, which accused the telecom department of indulging in “duplicity and muscle flexing”.

Telecom department officials said the government had obtained the stay on the grounds that Idea had violated laws by holding more than 10% stake in two mobile companies operating in the same regions.

Idea holds overlapping mobile permits in six telecom circles after its acquisition of Spice Communications in October 2008. “Apparently to cover up for its inefficiencies, the department of telecom (DoT) is now indulging in duplicity and muscle flexing. Idea will resist and not be bullied,” a company spokesperson said.

Officials from the telecom department said their action of moving the Delhi High Court was backed by legal opinion from Additional Solicitor General Amarjit Singh Chandhiok.

The legal opinion had said that Idea was in violation of telecom rules, which prohibits a mobile phone company from holding more than 10% stake in two telcos operating in the same region. It added that Idea Cellular and Spice Communications also violated the April 2008 merger guidelines, which prohibited new entrants from selling stakes within three years of obtaining licences.

Spice obtained four of its six mobile permits in 2008 ahead of the deal with Idea. Recently, the telecom department issued cancellation notices to Idea for the overlapping of licences in the same circle.

Idea gained access to Punjab and Karnataka markets following its buyout of Spice. A stay on the merger process will have major repercussions on the company, which has eight million customers in these two states. Besides, the company also stands to lose the Rs 843-crore refund it has been demanding from the government for surrendering the overlapping mobile permits.

Idea has lashed out against the department saying it had announced its merger with Spice in June 2008 and the department was provided a copy of the press release with a detailed plan of the proposed merger. The company also said that over the past three years, it had updated the department “at every step through more than a score of letters and meetings”.

The telco added that in July 2008, it had unconditionally offered to surrender overlapping licences if policy so required. “In a meeting in August 2008, the DoT advised Idea that it should obtain necessary court approvals, and then approach the DoT for merger of licences, which the DoT represented was admissible as per policy, and which incidentally had exactly the same effect as surrender, since neither the overlapping licences nor spectrum were ever used,” the company’s spokesperson said.

“Both Idea and the DoT acted as such, but when Idea approached the DoT for licence amendment after the courts approved the merger, the DoT exhibited incoherence at first, and lately high-handedness by way of selectively withholding 3G spectrum, issuing show-cause and demand notices, and now obtaining an ex-parte order on a merger approved over a year ago,” it added.

Source: Economic Times


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