"Bharti Airtel is shocked and disappointed to receive a demand notice of Rs. 650 crore from the DoT pertaining to the service of Subscriber Local Dialling to its subscribers between 2002 and 2005," the company said in a statement.
DoT found Airtel had routed national and international calls to its roaming subscribers as local calls, even after being told to stop the service in 2003, causing losses to the government exchequer and state-run Bharat Sanchar Nigam Ltd in 13 service areas.
Telecom Minister Kapil Sibal approved the penalty amount proposed by DoT on the company at the rate of Rs. 50 crore per service area.
Airtel said the Rs. 650 crore penalty is devoid of any merit and has no justification both on facts and in law.
"We are disappointed that DoT, which has the bounden duty to act rationally, has thought it fit to issue such a baseless penalty order, leaving us with no choice but to litigate," the company said.
The total revenue generated by the SLD service was a few lakh rupees and the DoT was aware of this fact, Airtel said.
The regulator had found this service to be customer friendly and in compliance of the licence conditions, the company said.
"Yet strangely, without as much as giving us a proper hearing, the DoT has after eight years issued a demand notice of Rs. 650 crore in complete disregard of the natural process of justice," the company said.
Bharti Airtel shares gained 3.27 percent to Rs. 299.90 in late afternoon trade on the BSE.
Airtel's Joint Managing Director and CEO, Gopal Vittal had written to Sibal seeking to discuss the matter before notices were issued. The request did not receive any response following opposition from DoT.
According to sources, DoT officials impose the maximum penalty of Rs. 50 crore on telecom companies, irrespective of the magnitude of violation and its impact, due to fears of allegations of corruption or possible action against them if the amount is lower.
The total penalties imposed on telecom companies are to the tune of Rs. 6,500 crore, according to industry estimates.
"We urge the DoT to set out a cogent policy on imposition of penalties so that the telecom companies can operate in a rational and transparent environment," Airtel said.