Idea's FDI proposal likely to get DoT approval soon: reports
29 May 2018
The Department of Telecommunications (DoT) is expected to clear Idea Cellular’s proposal to increase foreign direct investment (FDI) in the company to 100 per cent, facilitating the merger of Idea Cellular with Vodafone India.
Both Idea Cellular and Vodafone India have submitted the necessary documents and DoT's approval for the FDI proposal is likely within a week, reports quoting senior DoT officials said.
Approval for the FDI limit hike would pave the way for the clearance of the merger between Idea Cellular and Vodafone India, leading to the formation of the largest mobile phone operator in India by revenue and subscriber market share.
“They have submitted all the documents… we want to clear it at the earliest, it should happen maybe within a week,” a senior official said about the clearance of the FDI proposal.
The merger of Idea Cellular and Vodafone India will create a new entity with revenues of Rs63,000 crore, over 410 million customers, nearly 42 per cent customer market share and nearly 37 per cent revenue market share.
While the numbers definitely place the newly formed entity ahead of its competitors, the combined entity will also have a massive debt of Rs1,14,426 crores as per data availabe till March 2018.
The merger, which was proposed a little over a year after announcing the deal in March 2017, is almost complete and is likely to close in June.
As per the merger proposal, Vodafone India’s spectrum licences will be merged with those of Idea Cellular and Idea will have to take on the pending dues of the merged entity, which it will be liable to pay to the telecom department.
Vodafone India and Idea Cellular collectively owe about Rs18,870 crore in dues relating to a mix of pending licence fees, spectrum usage charges (SUC) and one-time spectrum charges (OTSC).
DoT had asserted in the National Company Law Tribunal (NCLT) that Vodafone will take on the debt of the merged entity, which it will owe to DoT. DoT has made sure to include this in the approval.
The government, though, won’t be able to force either the payment of their licence fee or SUC dues since the matter pertains to computation of a telco’s adjusted gross revenue (AGR), an issue under dispute for more than a decade and currently sub judice.
But, since Idea Cellular is acquiring spectrum from Vodafone India, they it have to pay the market price of administratively allocated, or non-auctioned, spectrum irrespective of whether a court case is on or a stay has been granted before the merger is approved.
However, the department accepting payment after the merger “doesn't hold ground. Idea can either pay up or get a court order, according to officials.
DoT is expected to take a softer view on the merger while according it utmost priority since this merger would earn the government substantial revenue, especially in a scenario where a lot of bankruptcies and M&A-driven exits of telcos have taken place, leading to several job losses.