Telecom ministry to impose Rs 300-Cr penalty on Idea Cellular

The ongoing spat between the telecom department and Idea Cellular is set to intensify. Telecom minister Kapil Sibal has accepted the recommendations of Additional Solicitor General Amarjit Singh Chandhiok to impose a Rs 300-crore penalty on Idea Cellular, and has cleared his department's move to slap this fine amount of the company, for holding more than 10% stake in two mobile companies in six regions of the country, in violation of existing norms. 

ET reviewed a DoT internal note on this issue. This note also adds that the DoT's position is further strengthened as telecom regulator Trai has recommended cancellation of the six overlapping mobile permits held by Idea Cellular The Aditya Birla Group firm holds overlapping mobile permits in six telecom circles after its acquisition of Spice Communications in October 2008. The Idea Cellular spokesperson slammed the DoT and said that "in 2008, post the proposal for the merger, the company had written to the telecom department and offered to surrender overlapping mobile permits" and also pointed out that this was a "matter of record". 

"It is surprising that the DoT has not taken cognizance of this and is now finding the company in violation," its spokesperson added. The government and Idea Cellular have been involved in a standoff recently over the telco's acquisition of Spice in 2008. Last week, the communication ministry got a stay on the 2008 merger between mobile phone companies Idea Cellular and Spice Communications from the Delhi High Court, leading to angry outbursts from Idea, which accused the telecom department of indulging in 'duplicity and muscle flexing' . The Aditya Birla Group firm, which is India's fifth largest mobile phone operator , also accused the DoT of obtaining the stay from the High Court "to cover for its (the department's ) inefficiencies" and added that "Idea will resist and not be bullied" . The telco is also moving the Delhi High Court seeking a vacation of the stay order. Idea holds overlapping permits in the following fashion. It acquired Spice Communications that had permits to operate in six regions - Punjab , Karnataka, Andhra Pradesh, Delhi , Haryana and Maharashtra - but actually offered services only in Punjab and Karnataka.

Idea merged these two with itself as it did not have mobile services in these circles, but did not use Spice's licences in the other four regions where it was already present . Idea Cellular did not use its own licences and airwaves allotted for Punjab and Karnataka because it had integrated Spice's mobile operations in these regions with itself.

The Aditya Birla Group firm had applied for these permits prior to its deal with Spice. Recently, the telecom department issued a cancellation notices to Idea for holding overlapping licences in the same circles as well as failure to rollout services in the circles where it held dual permits. The DoT, in its internal note, states that Trai was of the view that both sets of mobile permits held by the company had to individually comply with the rollout obligations since the department had not approved the Idea-Spice merger. The note adds that Trai had recommended Idea's permits in Karnataka and Punjab and that of Spice's in Maharashtra, Haryana and Andhra Pradesh be cancelled for failure to rollout services.

On Spice's mobile permit the Delhi circle, the note adds that airwaves had not been allotted and hence rollout clause could not be applied. ET has also learnt that with regard to Idea's mobile permit in Punjab and Spice's in Haryana and Maharashtra, the department has referred the matter back to Trai since one year had not been completed after the allocation of start-up spectrum. DoT officials say their decisions are backed by legal opinion from additional solicitor general Amarjit Singh Chandhiok.

The legal opinion had suggested 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 regions. It also 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 had obtained four of its six mobile permits in 2008 ahead of the deal with Idea.