Jio accuses Airtel of violating M&A norms in buying Tikona

Reliance Jio Infocom, upping the ante in its battle with telecom market leader Bharti Airtel, on Tuesday accused it of "flagrant misuse" of the government's M&A guidelines in its proposed acquisition of 4G spectrum and sites of Tikona Digital Networks

The government will lose Rs217 crore in revenue if it allows the acquisition of Tikona's 4G business by Airtel, says Jio in a letter to the Department of Telecommunications (DoT).

"We bring to your attention that the scheme of merger, as announced by Airtel to its shareholders and media, indicates flagrant misuse of provisions of merger and acquisition guidelines dated 20 January 2014 with an intention to cause loss of revenue to the government exchequer," Jio stated in the letter dated 15 May, which has been seen by sections of the media.

Reacting to the allegations, an Airtel spokesperson said, "Bharti Airtel has always been and will continue to be fully compliant with all regulatory guidelines. We strongly deny these allegations, which are yet another mischievous attempt to throttle / block competition."

In March this year, Airtel acquired 4G business of Tikona Digital for Rs1,600 crore, to help ramp up its broadband capacity (See: Bharti Airtel to acquire Tikona Networks' 4G Business).

The letter quoted from the Unified Licence (UL) guidelines to say an additional fee equal to the difference between the entry fee for Unified Access Service Licence (UASL) and entry fee paid for Internet Service Provider (ISP) licence shall be payable in addition to the entry fee as applicable for a new UL to migrate from ISP with Broadband Wireless Access (BWA) spectrum to UL regime.

"While this principle is well understood by DoT and all the stakeholders, it is not stated explicitly in the M&A guidelines and as a result is being misused by Airtel to delay the payment of legitimate dues to the government," the letter stated.

"We submit that Airtel already exploited this apparent gap in M&A guidelines to avoid paying entry fee earlier also, in the case of its merger with Airtel Broadband Services Private Limited (ABSPL) in 2013.

"For the ABSAL, DoT raised a charge of Rs436.09 crores against Airtel as entry fee for migration from ISP licence of ABSPL to access service of Airtel for the four circles where ABSPL held BWA spectrum with ISP licence," the letter stated.

It added, "It is pertinent to note that in 2013, Reliance Jio Infocomm has paid the entry fees of UASL licence of Rs1,658 crores for migration from its ISP licence with BWA spectrum to UL as directed by the DoT."

The letter urged DoT to immediately intervene in the interest of level playing field for all operators.

"Alternatively, you should consider refund of Rs1,658 crores paid by Reliance Jio, under direction from DoT, for migrating to Unified Licence in order to ensure level playing field," the letter added.