The proposed merger between India's Reliance Communications and Sistema Shyam could be threatened by new regulations governing spectrum trading.
Spectrum trading rules approved by cabinet last week could add an extra $600 million to the cost of a merger, the Economic Times reported, citing two unnamed senior executives.
The crux of the issue is the requirement for companies that acquired 800-MHz spectrum in the 2013 wireless broadband auctions to pay the difference between the price they paid and the market value of the spectrum, as determined during an auction in March this year.
According to the report, the government's reasoning is that the airwaves acquired in 2013 were non-contiguous and therefore not eligible for trading, whereas the spectrum from the 2015 auction was contiguous. The extra payment would be needed to clear the spectrum for trading.
Sistema Shyam, a subsidiary of India's Sistema, paid around 36.4 billion rupees ($548.7 million) for 800-MHz spectrum in eight circles during the 2013 auction.
The company recently confirmed it is in exclusive merger talks with Reliance Communications. The proposed stock swap deal would see Sistema exiting the Indian market.
Sistema Shyam has appealed to the nation's Telecom Tribunal over the prospect of paying a premium due to issues of spectrum contiguity, on the grounds that the fact that it was allocated non-contiguous spectrum was not its fault and it should not have to pay twice for the same airwaves.