KOLKATA: The ongoing merger process between Reliance Communications (RCOM) and Sistema Shyam Teleservices (SSTL) faces a crucial test on October 19 which may offer a solution to the Indian unit of the Russian conglomerate’s continuing legal tussle with the telecom department (DoT) over levy of spectrum contiguity charges.
Though the Telecom Disputes Settlement & Appellate Tribunal (TDSAT) had ruled in Sistema Shyam’s favour in March by striking down such charges imposed by the government, the telecom tribunal’s judgement was challenged by DoT in the Supreme Court in May, and the matter is now slated to come up for a final hearing on October 19.
Russian newswires have quoted SSTL’s parent, Sistema JSFC reportedly voicing apprehensions that “the procedure of hearing in the Supreme Court is being stalled for an uncertain period of time, which may complicate SSTL’s business and increase the timescale as well as worsen the terms of implementation of the consolidation transaction with RCOM”. Sistema Shyam, however, was guarded on the matter.
“It would be premature to comment on anything further on this, given that the matter is sub judice. The case is listed for final hearing in the Supreme Court on October 19, and we continue to be confident of a positive outcome on the matter,” said an SSTL spokesman in a written response to ET’s queries. At press time, RCOM did not reply to ET’s email. The outcome of the final apex court hearing will be critical for the RCOMSSTL merger. For instance, if the Supreme Court upholds the DoT appeal, then back-calculations would come into play to determine the precise spectrum contiguity charges that would have to be paid to the government. On the other hand, if the apex court judgement goes in SSTL’s favour, it would translate into significant cost savings for Anil Ambani-led RCOM, which is in the process of merging Sistema Shyam with itself in a cashless deal worth nearly Rs 4,500-to-5,000 crore. Post-merger, promoters of SSTL would own 10% in RCOM. Sistema Shyam, the country’s sole pure-CDMA player, has had prolonged differences with DoT on the differential pricing of contiguous and non-contiguous airwaves in the 800 MHz band.
This was after the DoT cited Clause 3.10 of the March 2015 auction rules that required SSTL, the sole buyer of 800 MHz spectrum in the 2013 auction, to pay the differential between March 2013 and March 2015 auction price on a pro-rata basis to make its airwaves contiguous or ‘continuous’. Contiguous spectrum in the 800 MHz band is more efficient and essential for offering 4G services.
However, Sistema Shyam had earlier submitted before the TDSAT that since it had already paid the Rs 3,639 crore market price for acquiring 800 MHz airwaves in eight circles in the 2013 auction, but was allotted non-contiguous spectrum, which was not its fault, it cannot be expected to again pay for the same airwaves.
Sistema Shyam’s position was upheld by TDSAT, which struck down the contiguity levy imposed by DoT, saying that the same rules needed to be followed for all telcos.
The telecom tribunal had specifically noted that the government had relaxed the differential pricing norm in Reliance Jio Infocomm’s case and allowed it to convert its non-contiguous 800 MHz spectrum into contiguous airwaves in some circles.
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Source: Economic Times
