Airtel, TTSL may have to pay Rs 15,000 cr to get DoT approval for merger

The merger of loss-making telecom firm Tata Teleservices (TTSL) with Bharti Airtel, which got the NCLT's green signal in January, has one more hurdle to cross before it is cleared by the Department of Telecom (DoT). And this one will pinch since it's a bill for unpaid dues of around Rs 15,000 crore.

"Airtel and TTSL have to pay around Rs 10,000 crore and Rs 2,800 crore, respectively, as SUC [spectrum usage charge]," a DoT official told The Economic Times. "Then there is another Rs 2,000 crore of OTSC [one-time spectrum charge] that transferee firm Airtel will have to pay in the form of bank guarantees to the government."

For instance, Vodafone had to pay OTSC of around Rs 3,900 crore for completing merger with Idea Cellular. The DoT had also asked Idea Cellular to furnish a combined bank guarantee of Rs 3,342 crore before taking merger on record.

In SUC and OTSC, licence fees will get also tacked on and this will be another big amount that the telcos have to cough up. The buzz is that demand letter will be sent out shortly.

In October 2017, Sunil Mittal-led Airtel and TTSL announced their merger on a no-debt, no-cash basis. In other words, Airtel would not take over TTSL's around Rs 40,000 crore debt and would neither pay any cash. However, according to a statement, as part of the agreement Airtel would assume a small portion of the unpaid spectrum liability of TTSL towards DoT, which would be paid on deferred basis. According to the daily, TTSL is expected to bankroll most of the dues even if Airtel formally assumes the responsibility to clear the dues.

The sources added that, going by historical precedence, DoT is expecting Airtel and TTSL to legally challenge the OTSC charges. Last month, telecom tribunal TDSAT had quashed a government decision to charge for additional spectrum allocated to RCom and had asked DoT to return bank guarantees worth Rs 2,000 crore to the Anil Ambani-led firm.

The DoT and telecom firms have long been at loggerheads over the scope and definition of Adjusted Gross Revenue, on which licence fees and other charges like SUC - two key revenue streams for the government - are calculated. Telcos have historically stymied DoT's efforts to recover such dues on the grounds that the definition of AGR was still disputed in court.

Typically, a telecom operator shells out 8% of AGR as licence fee and around 5% as SUC. As for OTSC dues, as per DoT rules, telcos have to pay for holding spectrum above 6.2 MHz/circle retrospectively from July 2008 to end-December 2012, based on market determined price decided in auction. Besides, for airwave holdings beyond 4.4 MHz/circle, the telcos would have to pay for the remaining period of their licences starting January 1, 2013.

Last September, the telecom department moved the Supreme Court for approval to secure dues worth almost Rs 33,000 crore from all operators. This development came against the backdrop of lower revenue from licence fees and SUC for the government. Union telecom minister Manoj Sinha informed the Parliament in February that the government's revenue mop-up from the telecom sector fell by about 22% in the 2017-18 fiscal.

Earlier this month, Vodafone Idea, Bharti Airtel and Reliance Jio paid the government about Rs 6,000 crore in spectrum dues but a huge amount is still stuck in legal disputes between telcos and DoT. Hence, the rulings of the various courts and tribunals will have a bearing on the DoT's future earnings.

(With PTI inputs)