DoT may ask Vodafone to clear Rs4,700 cr dues before merger with Idea: report
25 June 2018
The Telecom Department is looking to raise a fresh demand of around Rs 4,700 crore on Vodafone India Ltd, the Indian arm of British telecom major Vodafone Plc, in a move that would delay its planned merger with Idea Cellular to create a telecom giant.
The DoT is expected to raise the demand related to one-time spectrum charges (OTSC) on the company before the 30 June deadline for its merger with Idea Cellular.
The mega-merger of the second- and third-largest telecom companies in India is expected to create the country’s biggest telecom operator with over 430 million customers, a valuation of over Rs1,50,000 crore ($23 billion) and a 35 per cent market share.
Under the merger plan, Vodafone Group and the Aditya Birla Group Idea Cellular will hold 45.1 and 26 per cent, respectively, of the equity share capital of the merged company, with the balance 28.9 per cent held by the public shareholders.
Earlier reports had indicated that the DoT will approve the merger of Idea Cellular and Vodafone India only after Idea furnishes required bank guarantee and gives undertaking of owning the liabilities of Vodafone India that may arise in future.
DoT will seek a bank guarantee of around Rs2,100 crore pertaining to one-time spectrum fee of Idea Cellular and undertaking that the resultant will clear dues pertaining to one-time spectrum fee and other sub-judice matter in accordance with the court's order, reports say.
Idea will also be asked to replace one-year bank guarantee of Vodafone India submitted for deferred spectrum payment, in the absence of which Vodafone will be asked to clear the deferred payment liability, say reports.
The debt-ridden telcos proposed a merger to get some leeway in a market that is facing cut-throat competition with little or no margins to even pay off debt.
The combined debt of both the companies is estimated to be around Rs1,15,000 crore.
Vodafone India had merged all its arms into one company and there are dues of around Rs4,700 crore related to one-time spectrum charges (OTSC) on the company.
In 2015, Vodafone had merged its four subsidiaries Vodafone East, Vodafone South, Vodafone Cellular and Vodafone Digilink with Vodafone Mobile Services, which is now called Vodafone India.
DoT at that time had asked Vodafone to clear OTSC dues worth Rs6,678 core but the company challenged it in court. Following Supreme Court order, Vodafone had paid only Rs2,000 crore to get the deal cleared.
The telecom minister Manoj Sinha is learnt to have asked DoT to take legal opinion whether a demand regarding OTSC dues can be sought from Vodafone India.
"The DoT has received legal opinion which affirms that a demand can be raised from Vodafone," the source said.