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DoT to Indicate Dues on Spectrum Sellers; Calls for Caution

DoT to Indicate Dues on Spectrum Sellers; Calls for Caution

By Press Trust of India | Updated: 14 May 2016 12:51 IST

The Department of Telecom has informed operators that it will only indicate pending dues of a seller in a spectrum trading deal, putting the onus on the buyer to perform due diligence in the transaction.

The clarification has come after telecom operators asked the DoT whether it would issue any 'no-dues certificate' for an operator in a spectrum trading deal.

However, DoT has said it is the responsibility of a seller to clear all dues such as one-time spectrum charges and usage charges before concluding any sale agreement.

Under spectrum trading rules, the obligation regarding radiowaves of a company gets transferred to the buyer.

"In case where entire spectrum holding of the telecom service provider in all LSAs (licenced service areas) is intended to be traded, the seller will have to clear all its pending dues...DoT will indicate status of dues. However, the buyer may perform due diligence," the DoT said in a clarification issued Thursday.

The department in October last issued guidelines on spectrum trading to allow operators to procure frequencies from other players.

Recently Bharti Airtel bought entire spectrum of Videocon in six circles, broadband wireless access spectrum of Aircel and Augere. Reliance Jio too has entered into trading agreement with Reliance Communications. RCom will trade CDMA grade spectrum in 800MHz band in nine service areas where Jio doesn't have radiowaves.

Telecom operators had also sought clarification over liability of dues in cases which are under litigation.

The DoT said seller need to comply with in respect of pending one-time spectrum charges (OSTC) and spectrum usage charges under litigation at the time of applying for spectrum trading.

DoT at present takes bank guarantee equal to an amount of OSTC and SUC dues which are under litigation and stayed by the court of law shall be submitted by the buyer or seller to secure the interest of the licensor.

Initial bank guarantee shall be for a period of two years and later be renewed on annual basis one month prior to expiry of the validity of bank guarantee, the DoT said.

"Further, the government shall, at its discretion, be entitled to recover the amount, if any, found recoverable subsequent to the effective date of the trade, which was not known to the parties at the time of the effective date of trade, from the buyer or seller, jointly or severally," the DoT said.

Telecom operators had also sought clarification on time period for rolling out network by the buyer. The spectrum trading guidelines only said that if a company is buying spectrum that it will be responsible to for rolling out network in balance stipulated time period subject to a minimum period of two years.

The DoT clarified that the buyer of spectrum will be given two years or balance period for rolling out network, whichever is later.

"...buyer shall be given entire time duration to fulfil the roll -out obligations, in case buyer acquires part of the spectrum," DoT said.

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