The Department of Telecommunications (DoT) is awaiting legal opinion on the decision of whether or not it will be disobedience to the court’s order if it seeks the differential spectrum fee from Idea Cellular for spectrum charges ahead of the merger approval. This recent update alludes that the merger of the British subsidiary Vodafone India and the Kumar Mangalam Birla led Idea Cellular might face some delay. The matter has come up for the differential payment of the One Time Spectrum Charges by Idea Cellular for the bands which were allocated to Vodafone India years ago administratively instead of through an auction. The DoT is likely to persist for the difference amount which the acquirer has to pay in such cases, however, its demand is subject to court’s decision.
A senior official has pointed out to ET that there are three ways which the department can opt for in this matter, first one being a demand for OTSC of just over Rs 2,100 crore, while the second one would include seeking all dues including licence fee and spectrum usage charges from Idea Cellular. The third and the last option which the DoT can resort to are the clear dues, which have not been challenged in court yet.
The anonymous official tipped “DoT’s stand is very clear; we cannot raise demands for dues that are sub judice because that may lead to contempt of court. But there was a view that a legal opinion be taken on the matter, so all the three options have been put forth for legal opinion.” He further added, “Since the legal opinion has been asked for, we believe that the approval may take about a week more to be granted.”
This merger being one of the largest ones in the industry has created an environment of seriousness for everyone involved, thus pushing the DoT to tread carefully. This merger is also of strategic importance to the ministry which gives all the more reason for the department to stay in the good eyes of the court. The legal pathway and the opinion have also been advised since the process is not as simple as it seems. Things have further been complicated given that Vodafone Mobile Services itself is an amalgamation of six different companies.
During the 2014-15 merger of these companies, the DoT had raised the demands for the market price of these administratively allocated spectrum and not the entry fees. Although the demands by DoT were partially met, the matter moved to court where it was stayed by the telecom tribunal. It is due to this reason that the department is now cynical about raising the demands again fearing that the move would disobey the tribunal’s order.
Presently, Vodafone Mobile services hold the administratively allocated spectrum in 13 circles, while Vodafone India does not hold any. DoT after citing the dues stayed by courts will ask Idea to pay up for the raised demands if the courts decide in the department’s favour.
Even then, the department has been on the lookout for a legal opinion whether or not it can raise the demand for the spectrum minus entry fee in case a situation occurs where Idea Cellular loses the pending case.
In the combined entity which will be called Vodafone Idea Limited, Vodafone will initially own over 45% while the Aditya Birla Group will own 26%. Although the holdings of both the companies are different, both will have equal ownership rights and, over time their shareholding will also even out. The top-level management has already been appointed ahead of the merger with Balesh Sharma taking the reins as CEO, head of finance, HR, operations and circles.