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High Court Verdict Puts Idea-Spice Merger On The Chopping Block

Announcing the verdict in the Idea Cellular-Spice Communications merger case, the Delhi High Court has cancelled the transfer of six licences of Spice Communications to Idea Cellular, which it had acquired in 2008, reports The Economic Times. The court said that the company did not abide by the licence and merger guidelines, and did not furnish critical documents including rejection letters issued by the Department of Telecom (DoT), and records of correspondence between the two parties, in the court. The court also imposed a fine of Rs 1 crore on Idea, for not providing correct information.

It also added that the overlapping licences of Spice and the spectrum allotted for such licenses will stand transferred to the Department of Telecom, till it grants permission to Idea to use them. The court pronounced that Idea was using overlapping licences from 5 February 2010 till date, without taking permission from DoT, and that DoT is free to take any action against Idea for the breach.The court directed the DoT to ensure that that customers of Spice in Punjab and Karnataka, do not suffer due to interruption of services. However, any DOT order can be challenged by Idea before a competent court or TDSAT.

According to the court order (pdf) :

– Telecom license norms do not allow any mobile service operator to own a stake of more than 10% in another operator within the same service area.

– Merger of companies which do not own overlapping licenses can be allowed if there are at least three operators in each single service area.

– The department had also written to Idea informing the company that permission for merger can only be granted to a company only after three years of the grant of a license.

The Delhi High Court had earlier put a stay on the merger, after the DoT had put in a petition asking the court to revoke its earlier order approving the merger. Idea had acquired Spice communications in 2008, purchasing more than 40% stake in the company for Rs 2,700 crore in shares and cash. The merger was approved by the Delhi High Court and the Gujarat High Court. However, the Department of Telecom had not issued letters of approval for the merger.

In a statement to a business news channel, Himanshu Kapania, CEO of Idea Cellular, said that the company has not suppressed anything at all and followed the process as per DoT’s advice. It will revert to the DoT regarding the over lapping licences and shall soon be appealing for what it feels is right.

Disclosure: Spice Digital is an advertiser with MediaNama

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