Reliance Jio Infocomm has asked the telecom department (DoT) not to approve Bharti Airtel’s buyout of Tikona’s 4G business, alleging that the market leader was exploiting a gap in M&A rules which could cause an over Rs217 crore loss to the national exchequer.
In a letter to the DoT dated May 15, the Mukesh Ambani-owned company also alleged that Airtel’s Rs1600-crore deal with Tikona was actually a spectrum trading deal, but was structured as an M&A one to “circumvent spectrum trading guidelines which only permit trading between access service providers and not from ISP holders”.
Bharti Airtel denied the allegations, saying in a statement Tuesday that they were an attempt by Jio to “throttle/block competition.”
In its letter, Jio said that Airtel needs to pay a fee to the government for migrating Tikona’s broadband wireless access (BWA) spectrum from an internet service provider (ISP) license to the Unified License (UL) regime, which allows a company to offer voice services. Else, the government should refund Rs 1,658 crore that the Mukesh Ambani-owned telco had paid in 20913 under DoT’s direction for what it called was a similar migration to UL.
“This (Airtel-Tikona deal) is a prima facie case of revenue loss for the exchequer demanding your urgent attention. The DoT should not approve the proposed Airtel-Tikona transaction till Airtel has paid the differential license fee for migrating the BWA spectrum from ISP (internet service provider) license to UL (Unified License),” Reliance Jio said in the letter, also marked to the communications ministry and National Company Law Tribunal, which was reviewed by ET.
Requesting an urgent intervention by the DoT, Jio added that DoT could amend the merger and acquisition (M&A) guidelines to clarify the payment for migration upfront, prior to evaluating an M&A deal for approval. BWA spectrum held by an ISP licensee can be used to offer data services, while a UL holder with BWA can offer voice as well.
Jio has also said that Airtel has previously allegedly subverted M&A rules using a gap in the rules in its acquisition of Qualcomm’s BWA business.
“Bharti Airtel has always been and will continue to be fully compliant with all regulatory guidelines. We strongly deny these allegations, which is yet another mischievous attempt to throttle/block competition,” a spokesperson for the Sunil Mittal-owned company said.
Bharti Airtel had announced on March 23 that it intended to acquire Tikona Digital’s 4G business, along with its 4G spectrum, in five circles — Gujarat, UP (East), UP (West), Himachal Pradesh and Rajasthan — for Rs 1,600 crore. The deal, which was to be completed in 60 days, was aimed at ramping up its 4G spectrum capacity to take on Jio and the Vodafone-Idea Cellular combine in a fiercely competitive market.
Highlighting the rules, Jio said that if BWA spectrum under ISP license acquired in 2010 is to be used for access services including voice, in any manner – either by migration or merger – an entry fee equal to the unified access services licence fee has to be paid to ensure level playing field.
“While this principle is well understood by DoT and stakeholders,” Jio said that it is not explicitly mentioned in M&A guidelines, and “is being misused by Airtel” for acquiring Tikona’s business. In the deal announcement, Airtel “fleetingly” mentions about continuation of Tikona’s Wibro business which will be with the company’s shareholders, Jio noted.
“The arrangement clearly implies that Airtel’s acquisition of Tikona is only for the spectrum assets and has been done to circumvent spectrum trading guidelines which only permit trading between access service providers and not from ISP holders,” Jio said.
Jio also alleged that Airtel previously subverted M&A rules using the same gap in the rules in its acquisition of Qualcomm’s BWA business. While DoT raised a demand of Rs 436 crore, Airtel refuted it and moved the telecom tribunal, which granted a stay. A final order is yet to be passed.
Source: Economic Times