Vodafone, Idea may pay up dues under protest to get DoT approval
19 July 2018
Vodafone India and Idea Cellular and are likely to pay up the Rs7,268 crore in dues towards spectrum charges demanded by the government to get final nod from the Department of Telecommunications (DoT) as any recourse to litigation would mean potential delay in the $23 bn merger.
The companies are likely to pay the demand under protest, which means once the merger is approved by DoT they will challenge the demand in court.
Sources said that the companies have decided to first pay the Rs7,268 crore dues towards spectrum charges demanded by the government and challenge it post merger.
The Rs7,268 crore demanded by DoT includes the contentious Rs3,322 crore demand on Idea Cellular towards one-time spectrum charge (OTSC) for spectrum held beyond 4.4 MHz. Idea had earlier obtained a stay order from the courts on the OTSC but the merger and acquisition guidelines state that in the event of a judicial intervention, companies will have to furnish a bank guarantee for the amount.
The remaining Rs3,926 demand is on Vodafone and pertains to the entry fee and the auction-determined price of the start-up spectrum of 4.4 MHz, which has to be paid if a company goes for an M&A.
The companies, meanwhile, pointed to some discrepancies in the calculation of the dues but DoT is reported to have declined to accept the companies’ request to recalculate the amount.
“They (the companies) have come back to us saying there is some difference of opinion in calculation of dues. So DoT is looking into it and we have not taken a view yet,” PTI quoted DoT secretary Aruna Sundararajan as saying on Wednesday.
Earlier this month, DoT had granted conditional approval to the long-pending merger asking for the requisite payment.
The merged entity would be the country’s largest telecom operator with total revenues of over Rs80,000 crore, 437 million customers, 35 per cent subscriber market share and 39 per cent revenue market share.
The combined debt of the Vodafone-Idea will have a debt of Rs1,07,000 crore.
Once the merger is completed the two would remove overlapping sites, which would result in annual savings of around Rs 2,000 crore.
The merged entity will hold 1,850 MHz of spectrum that will include 1,645 MHz of liberalised spectrum, which will be capable of building substantial mobile data capacity, utilising the largest broadband spectrum portfolio with 34 3G carriers and 129 4G carriers.