Vodafone-Idea merger to be approved soon

By: | Published: June 22, 2018 3:40 AM

The Department of Telecommunications (DoT) is expected to clear the merger of Vodafone India and Idea Cellular early next week. Both the companies, however, may have to pay one-time-spectrum-charges (OTSC) dues, though these are under challenge in the court.

Vodafone-Idea merger to be approved soon

The Department of Telecommunications (DoT) is expected to clear the merger of Vodafone India and Idea Cellular early next week. Both the companies, however, may have to pay one-time-spectrum-charges (OTSC) dues, though these are under challenge in the court. The DoT is expected to ask Vodafone for Rs 5,650 crore – or a bank guarantee – and Idea for Rs 2,113 crore for its OTSC dues. Sources said the additional solicitor general (ASG) has replied on queries raised by the DoT and suggested that it could raise the issue of pending dues of Vodafone with Idea.

The DoT had sought ASG’s advice on whether it is legally tenable to raise a fresh demand from Idea on dues related to the 4.4 MHz spectrum (administratively allocated) to Vodafone. Also, the ASG’s view was sought on whether raising a fresh demand would tantamount to wilful disobedience of the court and result in contempt of court. “Now, (the) department has firmed up its view and will approve the merger, based on the condition that Idea provides bank guarantees as per M&A guidelines for dues of both companies. Once they meet this, a final approval will be given,” a senior government official explained.
On asked when is the conditional approval expected, he said the department is waiting for telecom minister Manoj Sinha, who is on an official tour abroad, to return and sign the approval. “It should happen at best by coming Monday or Tuesday,” he added.

Idea’s extraordinary general meeting is also scheduled for next week (June 26), where the company’s shareholders will vote on the name of the merged entity – Vodafone Idea Ltd. Vodafone’s OTSC dues relate to the 2015 merger of its six group firms on which the DoT had raised dues totalling a little over Rs 8,100 crore. Vodafone moved the TDSAT, which granted a stay in the matter. The DoT then approached the Supreme Court that directed Vodafone to make a part payment. The company gave a bank guarantee of Rs 2,000 crore to the DoT. Later, in a separate case in the tribunal on the same merger, it again made a payment of Rs 450 crore.

DoT sources said after the demand is raised, Idea and Vodafone will either have to furnish the bank guarantees or seek legal avenues like Bharti Airtel did for its merger with Telenor India. The DoT cleared the Bharti-Telenor merger after the Supreme Court had dismissed its appeal against the TDSAT order, which directed it to approve the merger without insisting on a bank guarantee for OTSC dues. Telecom secretary Aruna Sundararajan on Tuesday told FE that the merger would be cleared very soon. “We will do our due diligence, but at the same time, we are working with the companies to ensure that there are no delays,” she had said.

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