Idea Offers To Demerge Punjab, Karnataka Licences !

[Honest 836]

Idea offers to demerge Punjab, Karnataka licences

7 Aug, 2008, 0053 hrs IST, ET

NEW DELHI: Idea Cellular, which had acquired a controlling stake in Spice Communications in June for about Rs 2,700 crore, has told the Department of Telecom (DoT) that it is willing to demerge its licences in the Punjab and Karnataka circles into a separate entity. Idea, which has sought clarity from the DoT on merger and acquisition norms, has also said it would not hold more than 10% stake in the demerged entity.

This adds yet another twist to the Idea-Spice merger. It had been first reported in June, that following the acquisition, Idea Cellular has written to DoT seeking regulatory clarity on a host of issues, including the licenses and radio frequencies that were recently awarded to Spice. The merger has come under DoT scrutiny as the department is of the view that it violates the newly issued guidelines on mergers and acquisitions — the norms disallow mergers between operators in the same circle for a period of three years when the from the date the license is granted.

The issue is as follows: On January 2008, Idea was awarded licenses for several new circles including Karnataka and Punjab. However, in June 08, it acquired Spice, which held licenses in these circles and also offered mobile services in these two states.

Idea has now told the DoT that if it were in violation of the licensing norms on the grounds that it holds overlapping licenses in these two circles, the company will demerge the licenses it had been awarded for these zones in January and sell them. The move will not impact Idea’s operations in these two circles — this is because, it will continue to have a presence in these circles via Spice Communications, which is currently being merged with Idea.

Idea can therefore give up its licenses in these two circles, especially considering that it has not launched any cellular operations under these licenses. Idea has also clarified that following the demerger of these licenses, neither it, nor any of its associate companies will hold more than a 10% stake in them, as Indian laws do not allow telcos to hold more than 10% stake in two different licenses in the same circle.

Idea has also said that if the DoT did not accept this option, it is willing to surrender the licenses issued to it in January 08 for Punjab and Karnataka. In this scenario, the company has said that the DoT must refund the Rs 300 crore it has paid as entry fee for its licenses in these circles. Similarly, in January 08, Spice was awarded mobile licenses in four circles — Delhi, Haryana, Andhra Pradesh and Maharashtra.

Idea has also indicated that it is willing to demerge or surrender the licenses for these circles that were awarded to Spice. Here again, the move to give up the licenses that were formerly held by Spice will not have an impact on Idea Cellular because Idea already has full-fledged mobile operations in all these circles.

Idea is now awaiting the DoT’s response on these issues.

[Honest 836]

Govt asks Idea to return licence of Punjab or Karnataka

11 Aug, 2008, 1325 hrs IST, PTI

NEW DELHI: The government on Monday asked cellular operator Idea to surrender the licence of either Punjab or Karnataka telecom circle to enable the merger of Spice Communications with itself.

Department of Telecom Secretary Siddharth Behura said the company would not get any official "response" on the merger proposal till one of the two licences was returned.

[@ksh@T 20]

well thats true but the biigest point u lose man they will not refund .. he he

NEW DELHI: Government has asked Idea Cellular to surrender either its licence or that of its latest acquisition Spice Communications in Punjab and Karnataka to avoid overlapping, but said it would not make any refund of licence fees.

"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," Telecom Secretary Sidhharth Behura said here on Monday.

Idea could lose Rs 300 crore in this process. According to analysts, this may not sound good for the company which had reported a fall of 14.7 per cent in net profit to Rs 263.1 crore in the first quarter of the this financial year due to forex losses and higher interest charges, even as its revenues grew over 47 per cent, due to robust subscriber addition.

Analysts said Idea could surrender its own licences and retain Spice licences in both the circles as Spice has 800 Mhz spectrum in these two areas which can accommodate more users.

Besides Spice is already offering services there whereas Idea is yet to start service. It has got spectrum (4.4 Mhz) for Karnataka and for Punjab it has just got license.

Idea Cellular, which had acquired a controlling stake in Spice Communications in June for about Rs 2,700 crore, had sought clarity on the licensing issues from the Department of Telecom.

DoT in its response had said post merger with Spice, Idea would have to return one of the licences in each circle of Punjab and Haryana.

[Honest 836]

Idea may take Rs 350-cr hit on Spice equity buy

Business Line

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According to existing rules, a single company cannot hold more than 10 per cent stake in two different telecom firms in the same circle.

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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.

[Honest 836]

DoT norms may force Idea to pay more for Spice

4 Sep, 2008, 0500 hrs IST, ET

NEW DELHI: Idea Cellular may have to pay more for acquiring Spice Communications. The government has set up a committee to specify spectrum transfer charges in case of mergers.

And while the Idea-Spice deal was announced before the panel was set up, a senior official in the department of telecom (DoT) said it is possible that charges may be levied on this merger as well. “It is up to the committee to decide if this fee would be applicable to the Idea-Spice deal,” the official added, while refusing to give details.

DoT, while announcing merger guidelines earlier this year, had said telcos would have to pay a spectrum transfer charge during a merger, but did not specify the fee.

Industry sources are divided on whether the Idea-Spice transaction should attract spectrum transfer charges as DoT has already asked Idea Cellular to surrender one of the two telecom licences for Punjab and Karnataka circles. This is because Idea Cellular, which had acquired a controlling stake in Spice (which offered mobile services in Punjab and Karnataka) for about Rs 2,700 crore in June, held two licences in these circles after the acquisition.

“After Idea surrenders its licences, it can be argued that there is no spectrum transfer. In this scenario, it is not transferring Spice’s spectrum to that of its existing licence,” said an executive with an operator which was recently awarded a telecom licence. Existing merger policy does not offer any clarity on the issue.

Added another industry source, who tracks policy: “The merger norms were announced on April 8 and the Idea-Spice deal happened in June. So technically, DoT can impose a fee on Idea as the deal brings with it the radio frequencies held by Spice. But imposing this fee at a later stage is equivalent to changing the goalposts after half the game is over.”

DoT is yet to approve Idea’s acquisition of Spice. In addition to the spectrum transfer charges, the new merger norms also state that new licensees cannot merge with another existing operator for a period of three years.

It is on account of this clause that the DoT has asked Idea to give up its licenses for the circles of Punjab and Karnataka which were awarded to the company earlier this year. Idea Cellular has already informed the DoT that it is willing to surrender the licences for these two circles, while adding that the government must refund the Rs 300 crore it has paid as entry fee.

The DoT while ruling out a refund is yet to respond to Idea’s demands for further clarity on the M&A norms. Giving up these licences will not impact Idea’s operations in these two circles. This is because, it will continue to have a presence in these circles via Spice Communications.

Idea can therefore give up its licenses in these two circles, especially considering that it has not launched any cellular operations under these licences.