Weigh options

Mumbai, Aug. 6: Aditya Birla-owned Idea Cellular has sought approval from the department of telecommunications (DoT) for a scheme of restructuring under which the telecom licences owned by Spice Communications will be transferred to a separate legal entity.

Idea has devised the plan to wriggle out of a sticky situation arising from its recent acquisition of a majority stake in Spice Communications, which holds the licences for Punjab and Karnataka circles.

Like Spice, Idea holds unified access service (UAS) licences in the two circles, creating a problem of overlapping licences.

Under the existing regulation, no mobile telephone company can hold more than 10 per cent in another telecom service provider that operates in the same circle.

Under the plan, neither Idea Cellular nor any associate firm will hold a direct or indirect stake of more than 10 per cent in the new entity.

The company feels that such a scheme will enable it to circumvent the rigours of clause 1.4 of the UAS licence agreement, which prohibits a single company or individual from holding a “substantial equity”, either directly or through associates, in more than one licensee company in the same service area.

“Substantial equity” has been defined as equity of 10 per cent or more by the government.

In late June, the Aditya Birla-controlled company announced it was acquiring the BK Modi group’s 40.8 per cent stake in Spice Communications for Rs 2,700 crore.

The company also hinted that it was in talks with an interested player when it told the DoT that “the transfer will happen…to a transferee who is fully eligible in accordance to the eligibility criteria….and who shows willingness to comply with the terms and conditions of the license agreement, including all roll out obligations.”

Asked about the letter to the DoT, Idea Cellular managing director Sanjeev Aga said, “We’re in touch with the DoT to find out what the rules are.”