The new intra-circle laws issued (on 22nd April 2008) by the Government prohibits intra-circle mergers for a period of three years. With operations in 9 circles Idea overlaps Spices’ operations in Karnataka and Punjab. And according to telecom M&A guidelines no mergers are allowed for a period of three years. Idea ended up paying a non-refundable licence fee amounting to Rs 358 crore.

Even Spice ended up paying the USAL fee to obtain new services in Andhra Pradesh, Delhi, Haryana and Maharashtra. Both Idea and Spice will need to approach the Department of Telecom for transfer of licences.

The merged entity have two ways out of the situation: (a) surrendering licence (b) or sell the six licences. But surrendering the licences would not be wise as the entry-fee is non-refundable. The merged entity will have to sell the licences to a new company as the existing law does not allow any merger of licences or spectrum in these six circles.

The best part is that none of the companies have been issued spectrums in these six circles.