In a new update, DoT has directed that Idea Cellular, before heading towards the merger with Vodafone India, will have to liberalise the administratively-allocated spectrum held by Vodafone, worth about Rs 45 billion. Liberalising of the spectrum will mean that the telco will allow to use every technology like third-generation (3G) or 4G services. The direction to liberalise the spectrum held by Vodafone India comes from merger and acquisition guidelines. For this Idea Cellular will have to pay the market price for 4.4 MHz of airwaves allocated administratively or will have to surrender these to the government. As for Idea’s own administered spectrum above 4.4 MHz, the telco will have to issue a bank guarantee. However, things can change as pertaining to Idea’s own spectrum the telco can resist the bank guarantee demand for its spectrum as Supreme Court had dismissed a plea of DoT for a one-time spectrum charge on airwaves above 4.4 MHz allocated administratively, in the recent Airtel-Telenor merger.
As per Business Standard report, sources aware of the matter say that liberalisation for both the telcos could cost Rs 50-60 billion. Also, the telcos asked for DoT’s final approval on the merger last week. In the meanwhile, DoT is also on the task of calculating how much charges are being levied on the telcos, for which the department is going to raise demand by Wednesday. However, there is also some speculation that DoT’s demand of liberalising Vodafone’s administered spectrum could be resisted in the court.
Although it is established that if a demand by DoT is not raised by May 30 or May 31, then Idea might have to pay whatever is asked of it. However, it is the telco’s thought that DoT’s demand will only be justified in circles where the validity of licence will increase after the merger.
A source quoted “The firm either has to wait for the courts to open, which will delay the merger or pay whatever is demanded.” Also, it is noteworthy that this will be the first time where the acquiree will hold administered spectrum after a merger. In the earlier two approvals which involved Airtel-Telenor and Reliance Communications, MTS wasn’t required to pay for liberalisation since both Telenor and MTS had all auctioned spectrum. In the previous deal, RCom was supposed to pay about Rs 26 billion for liberalising Aircel’s airwaves, but the deal couldn’t go through.
Besides the liberalising charges, DoT will not likely require the telco to make payment for other dues, as a big chunk of them are under litigation or stayed by the courts, to name a few – licence fees and spectrum charges. Although there will be the requirement for issuing an undertaking on Idea’s part for taking ownership of the dues when there is a final decision taken by the courts. Post the merger, Idea will be the company which will be the licensee to DoT and Vodafone will cease to exist.
Idea Cellular had also filed an approval to extend the cap of FDI in the company to 100%, to allow the merger to go through unhindered. The decision on the same is also expected to come out in a few days. DoT is also expected to give an affirmative response to the merger by June 15. The department of industrial policy & promotion has also raised no objections to the merger.
To hasten the merger process, Kumar Mangalam Birla, Aditya Birla Group chairman met the telecom minister, Manoj Sinha last week. Not only this, the Department will also likely pass the merger fast as it would mean a feather in the cap for the DoT in terms of ease of doing business, especially in a sector where bankruptcies and declining financials have become a norm since late 2016.