­Idea Cellular has been threatened with the loss of 3G spectrum and several of its GSM licenses after the Additional Solicitor General of India stated that the company had broken M&A rules when it brought a stake in Spice Telecom in 2008.

The Additional Solicitor General (ASG) also proposed a fine of US$66 million against the company.

Idea Cellular has strongly denied the allegations.

The ASG has sent his report to the Department of Telecom writing that the two companies violated a lock-in period clause which says that telecoms companies cannot enter in mergers within three years from the effective date of their licenses being granted. In total, four new licences were issued to Spice and two to Idea Cellular on January 25, 2008. Hence,mergers of their operations should not have started until January 2011.

In 2008, Idea brought a 41.1% stake in Spice – which resulted in the companies holding overlapping licenses in six of the country’s telecoms circles (or licensed zones). The ASG has suggested cancelling the new licences in these six circles of Delhi, Maharashtra, Andhra Pradesh, Haryana, Punjab and Karnataka.

According to the company’s statement, the Idea and Spice merger, since approved by the courts, happened to involve six overlapping licenses. Despite being issued spectrum for five of these, it is Idea which advised the DoT that it was not using such spectrum; in effect, placing overlapping licenses in a de facto escrow pending receipt of the DoT’s formal letter of merger, including surrender, if at all that was attracted.

In addition, Idea has won 3G spectrum in four out of the six circles and DoT has been advised to withdraw the 3G spectrum or  the licence would be cancelled.