It has almost become certain that Idea and Vodafone will also have to pay OTSC before their merger is cleared by the government.
With the department of telecommunications (DoT) planning to challenge the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) order asking it to clear the merger of Telenor India’s operations with Bharti Airtel without insisting for a bank guarantee of Rs 1,500 crore towards one-time spectrum charges (OTSC) for holding spectrum beyond 4.4 MHz, it has almost become certain that Idea and Vodafone will also have to pay OTSC before their merger is cleared by the government.
Sources in the DoT said that the merger and acquisition policy framed in February 2014 clearly states that OTSC need to be cleared in case of any M&A and if the matter is under dispute in courts, then a bank guarantee for the same amount needs to be furnished.
Based on this, the DoT had raised a demand for a bank guarantee of Rs 1,500 crore from Bharti, which had acquired the operations of Telenor India last year in February. Since Telenor has operations in only seven circles, the DoT had demanded the amount due from Bharti from only these seven circles. Bharti had got the approval from other regulatory bodies for the merger but the DoT refused to grant permission unless the bank guarantee was furnished.
However, on April 10, Bharti got a relief from TDSAT which asked the DoT to take the merger on record without asking for the payment. It is this order which the DoT is set to challenge in the Supreme Court. If Bharti fails to get any interim relief from the SC, it would mean that even Vodafone and Idea, which have announced a merger, received approval from other regulatory bodies will also have to pay around Rs 5,712 crore towards OTSC.
If the DoT insists, the two will also have to pay another Rs 8,031 crore for allegedly under-reporting their adjusted gross revenue. Both the matters are under challenge in court, which has provided a stay on payment but then at that time the merger was not under consideration.
Idea Cellular while declaring its earnings on April 28 said in a statement that it expects the merger to get the final approval in the first half of the current calendar year. “DoT will challenge the interim relief given to Bharti by TDSAT. It will move Supreme Court very shortly.
At present, it is finalising the note on this, which has already been vetted by the legal division and is awaiting clearance from telecom minister and secretary,” a senior government official told FE.