DoT may demand payment of Rs2,100-cr dues for clearing Vodafone-Idea merger
15 June 2018
The Department of Telecommunications (DoT) will insist on a bank guarantee for a little over Rs 2,100 crore from Idea Cellular Ltd towards one-time spectrum charges before it approves a merger with Vodafone India, reports quoting sources close to the developments said.
DoT will seek a bank guarantee of around Rs2,100 crore for clearing Idea Cellular's planned merger with Vodafone India. The amount pertains to one time spectrum fee of Idea Cellular.
One-time spectrum charges are payable by companies, which want to convert their administered spectrum or spectrum not bought in an auction to liberalised or auctioned spectrum. Auctioned spectrum can be deployed flexibly for any purpose, unlike administered spectrum.
Idea Cellular will also be asked to replace one-year bank guarantee of Vodafone India submitted for deferred spectrum payment.
The two companies will also have to give an undertaking of their clearing dues that are sub-judice as per the decision of the courts, according to the report.
While the two companies have several unpaid dues, which are being challenged, DoT’s guidelines on mergers and acquisitions (M&A) empowers the department to insist on payment of one-time spectrum charges by the transferee company — in this case Idea Cellular.
Since the payments are being challenged in a court of law, DoT cannot insist on payments. However, DoT can ask the resultant merged entity to give an unequivocal undertaking to assume responsibility for such payments as and when the matter is resolved.
Telecom Secretary Aruna Sundararajan had, last month, said that the clearances related to the mega merger of Vodafone and Idea Cellular are being expedited and that it "should get done" in the timeframe of June outlined by the two companies.
The merger of Idea and Vodafone will create India’s largest and the world’s second-largest mobile phone operator with over 400 million subscribers and a 35 per cent market share.
The idea is to dominate a market in order to challenge Mukesh Ambani’s Reliance Jio Infocomm Ltd that had disrupted the market with free voice calls and dirt cheap data tariffs.
Earlier this month, Idea Cellular had announced that the Telecom Department has approved raising the foreign direct investment limit in the company to 100 per cent, putting its merger deal with Vodafone in the last leg of regulatory clearance.