After a long time of going back and forth, the Department of Telecommunications has finally given its last and only needed approval for the Vodafone Idea merger. This final clearance by DoT has paved the way for Vodafone Idea Ltd, the largest telco in the country in terms of Revenue Market Share and subscribers. After this final nod from the department, the Vodafone India company will be dissolved, and the licenses along with the assets and liabilities of the company will shift to Idea Cellular. The new company will be called Vodafone Idea Ltd, as confirmed by Idea earlier.
An official from DoT said about the development to ET as “Bank guarantees for deferred spectrum payments that Vodafone owes to a DoT will be amended by the banks concerned, and will be transferred to Idea Cellular, since that will be the entity that will hold the licenses.”
He further added, “The approval letter, however, includes the conditions that the merged entity will have to comply with the outcomes of pending cases in the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) and other courts.”
Reportedly, Idea Cellular and Vodafone had moved the court to contest the demand of bank guarantees from the telcos. However, the DoT has finally issued an affirmative to the merger on the conditions that both the companies will have to comply with the outcomes of the pending cases in court. The incorporation will render both the companies in a better position to tackle increasing competition in the country after a yearlong period of poor financials.
Now the only left step for both the parties is to inform the Registrar of companies of the new change. After this move, Vodafone India will no longer be in existence.
After the long clash with DoT over the issue of paying bank guarantees worth Rs 7,268 crores, both the companies agreed to pay the amount ‘under protest’, meaning that they could contest the demand further in court and if the outcome is in their favour, then the DoT would have to return the bank guarantees. Out of the total amount, the DoT asked for Rs 3926.34 crore (in cash) by Vodafone India as spectrum liberalisation charge and a bank guarantee of Rs 3322.44 crore by Idea Cellular for one-time spectrum charges.
The merger would mean the combination of workforce and strong assets of both the companies which would result in the saving amounting to $10 billion, which Vodafone Idea Ltd will use to better take on competition like Bharti Airtel and Reliance Jio. Vittorio Colao, Vodafone Group CEO also said that he’d expected the merger to close in August. In the new company, Balesh Sharma will take the reins as CEO of the telco with 430 million customers and revenue market share of 37% under the new name.