DoT to Not Revise Repayment Figure of Rs 7,268 crore for Idea and Vodafone

By July 18th, 2018 AT 2:44 PM

After Idea Cellular and Vodafone India requested DoT (Department of Telecommunications) to recheck its calculations of the pending dues which soon to be merged entities owed to the government, now the department has come up with a decision on the same. To the disappointment of Idea Cellular and Vodafone India, DoT has said that its calculations are correct and that no change will be made to the previously quoted amount of Rs 7268 crore. An official from DoT told ET “The department’s calculations seeking bank guarantees and cash payment from Idea Cellular and Vodafone India, respectively, are correct and have been communicated to the companies.”

dot-payment-idea-vodafone

In the last move by DoT, the department had given a conditional nod to the merger of Idea Vodafone which was subject to the repayment of Rs 7,268 crores. Out of the total sum, Idea will be required to furnish bank guarantees of Rs 3,342 crore, while Vodafone will be demanded to make a cash payment of Rs 3,926 crore towards market price for non-auctioned airwaves which the company has held.

In response to the figure calculated by the Telecommunications Department, both the companies had noted some discrepancies in the total value and had thus requested DoT to revise their estimates. However, DoT has refused to make any changes to the quote for repayments which it furnished earlier.

The DoT official said that it would be in the companies’ best interest to fasten the merger by paying the pending dues. Although, they are free to go ahead and challenge the demands, doing so would mean a delay in the already stalled M&A move.

The DoT official added, “Now, it is up to them whether they want to move court or pay up immediately, which is in their interest if they want the deal to close quickly.” Also, Industry experts are of the opinion that Idea Cellular would challenge the demand given that the apex court stayed a similar claim on Bharti Airtel while acquiring Telenor India.

DoT has also clarified its stance on the issue saying that it would go on the offence to counter any adverse decision by the merging entities on the grounds of opposing repayment of dues. The department also said that it would not shy away from approaching the Supreme Court if it finds the ruling of lower courts as dissatisfactory.

Notably, the merger which is still awaiting the final nod from DoT has obtained approval from all other required authorities. DoT’s decision remains the final one in this matter. Also, the merger is already stalled by a month’s time since it was previously planned to be finalised by June 2018.

Besides the two other demands of DoT, Idea will be needed to replace Vodafone’s bank guarantees worth Rs 6,452 crore held by DoT for the spectrum payments that fall due over the next one year. Since Vodafone India will not exist after the merger, it will be in the hands of Idea Cellular to pay up the pending dues of the telco including one-time spectrum charges, a matter which presently remains stayed in the telecom tribunal.

The delay in the DoT’s pending decision and due to the issue of repayment of dues is starting to eat up on the combined savings of $1 billion which the merged entity would instead utilise for development. Also, with a debt of Rs 1,14,000 crore on the shoulder of the merged entity, it will be upon the company to raise funds to better their 4G network. Analysts are of the opinion that the combined entity will need to pump Rs 15,000 crore to boost the 4G network capacity to bring it to the level of Reliance Jio.

It is noteworthy that the combined entity of Vodafone and Idea Cellular which will be called Vodafone Idea Ltd will be better able to take on competition, given the synergy of resources and the combined workforce. The newly formed company will even take over the current largest telco Bharti Airtel in terms of subscriber base.

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Chakri is a go-to guy for your next smartphone recommendation. Back in his engineering days, he used to play with smartphones by installing custom ROMs and that passion got him into the tech industry. He still goes nuts about a smartphone knocking his door for review. Currently managing everything at Telecom Talk, Chakri is trying to master PUBG Mobile in his free time.

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