The data tariff war kick-started by Reliance Jio started a consolidation stream in the industry. As a result, many companies shut operations, and a lot of merger and acquisitions happened. After the significant M&A of the Vodafone India and Idea Cellular, Bharti Airtel and Tata Tele Services are the next to go through a similar ordeal. In a new update, the Department of Telecommunications (DoT) has announced that Bharti Airtel and Tata Tele Services will have to pay around Rs 15,000 crore combined to obtain clearance for the merger deal. These charges will be for spectrum usage charge (SUC) and one-time spectrum charge (OTSC) as a pre-condition for the M&A.
Bharti Airtel and TTSL Merger - Pending Clearance from DoT
As per an ET Telecom report, an official person aware of the development said, “Airtel and TTSL have to pay around Rs 10,000 crore and Rs 2,800 crore, respectively, as SUC.” He further added, “Then there is another Rs 2,000 crore of OTSC that transferee firm Airtel will have to pay in the form of bank guarantees to the government.”
It is worth noting that Bharti Airtel, led by Sunil Bharti Mittal is the second number telco in India and currently TTSL is a loss-making telco in the industry. In their merger deal, both the companies have obtained clearance from the National Company Law Tribunal (NCLT). In this merger, Bharti Airtel will acquire Tata Sons-promoted carrier’s consumer mobility business under a debt-free, cash-free deal. Currently, both the telcos are waiting for final approval from the DoT.
Dispute of AGR and Legally Challenging Charges
The official further added that the license fees which are being calculated will be another expense for the merging telcos. A telco’s AGR is the revenue which it derives from licensed services. There has also been an ongoing dispute regarding the AGR in the telecom industry. A telco typically pays 8% of AGR as licence fee and roughly 5% as SUC, which are major revenue streams for the government.
Up until now, the telcos have opposed the recovery of various fees from the telcos on the ground saying that AGR was still in dispute. This time also, the DoT expects the two telcos to challenge the OTSC charges legally. The official also added that with several of these dues like SUC and OTSC are under litigation in different courts involving different parties, as such the total payment which the department gets will depend on the rulings of the various court and tribunals.
The Bharti-Tata Tele deal was first announced back in October 2017. But in October last year, in a letter, the companies noted that Bharti Airtel would take care of all the charges including license fees, SUC and OTSC but given the bleeding situation of Tata Teleservices, Tata Sons is likely to bankroll most of the dues even if Airtel has taken it in its hands to clear the dues.