Merger & Acquisitions Get A Boost: SC Junks DoT Plea on Bharti-Telenor

In a move that will have a positive impact on several merger and acquisition deals in the telecom sector, the Supreme Court on Wednesday dismissed the department of telecommunications (DoT) petition challenging the telecom tribunal’s order directing it to approve the merger of Telenor India with Bharti Airtel without insisting the latter to first pay up Rs 1,500 crore towards one-time spectrum charge (OTSC). The order clears the path not only for the Bharti Airtel-Telenor deal but will also expedite the Vodafone-Idea merger which is in the final lap as well as the Bharti-Tata Teleservices pact which is still to reach DoT for approval. With the Supreme Court’s order, the DoT’s basic contention that as per the M&A policy the concerned companies need to clear their OTSC before they get the government’s approval, even if the matter is under litigation, stands rejected.

The M&A policy states that if the OTSC is under litigation and the companies have obtained a stay order from courts, they need to pay a bank guarantee of the amount. Bharti Airtel had challenged this in the Telecom Disputes Settlement and Appellate Tribunal (TDSAT), which had directed DoT to approve the merger without insisting on the payment. However, DoT went ahead and challenged the order in the Supreme Court. DoT’s stand was that policymaking was its domain and TDSAT has no jurisdiction over it. In December 2012, DoT had come out with an order which stated that operators having spectrum beyond 4.4 MHz through administrative allocation need to pay auction-determined price for that.

DoT had raised a demand of around Rs 24,000 crore on all the legacy operators. However, every operator got a stay order from different high courts and the matter is yet to be finally decided. Telecom operators were anxiously watching the outcome of the case because with DoT insisting on bank guarantee with M&A policy as the basis the merger of Vodafone-Idea could also have got delayed or they would have to pay up around Rs 5,712 crore towards OTSC. Vodafone and Idea have received all other regulatory approvals and only DoT’s nod is awaited. Similarly, Bharti’s acquisition of the mobile consumer business of Tata Teleservices could also have got stuck when it reached DoT for final approval. – Financial Express