DoT to Allow 100% FDI for Idea Cellular as the Proposal Expected to Pass in a Week

Previously, Idea Cellular had proposed a plan to DoT asking for the limit of FDI in the newly ‘to be merged’ company to be extended to 100%. In the coming week, the proposal has been expected to get the affirmative from the department. Officials confirmed the news after the Aditya Birla company submitted all required documents and when Vodafone India did the same. This approval would mean that the Idea Vodafone merger will just be one step away from approaching completion.

idea-cellular-fdi-dot

A senior official said about the merger to ET as “They have submitted all the documents… we want to clear it at the earliest, it should happen maybe within a week.” He further added, “After that, there should be no hurdle for the merger.” He stated that after the FDI clearance the merger should be on its way within days. It is notable that the deal which Vodafone and Idea signed in March 2017 will finally materialise in the form of Rs 63,000 crore entity by the end of June this year.

As part of the approval of the FDI limit, which DoT asserted in the National Company Law Tribunal (NCLT), Vodafone will take on the debt of the merged entity which it will owe to the DoT. The DoT has made sure to include this in the approval which has been recently signed off.

The payment which is being talked here, of the combined entity, amounts to Rs 18,870 crore as a result of pending licence fees, spectrum usage charges (SUC) and one-time spectrum charges (OTSC). However, even though the government might be tempted to force the telcos’ hand to pay the license fee or the SUC dues, it won’t be able to do so since the issue of Adjusted Gross Revenue (AGR) which has been under dispute for more than a decade and under sub judice is the underlying factor in the payment.

M&A officials, however, quoted that since Idea Cellular is the one acquiring spectrum from Vodafone India, it will have to pay the market price of administratively allocated, or non-auctioned, spectrum regardless of whether or not there is a court case on stay or even when it is granted before the merger’s finalisation. A recent order in DoT also supported the above statement, which said that payment after merger “doesn’t hold ground. They (Idea) can either pay up or get a court order.”

Also, another news which came up as a result of Bharti-Telenor merger where the court barred DoT to seek bank guarantees in lieu of OTSC charges from Bharti Airtel may also have an unprecedented effect on the merger of Vodafone and Idea. As a result, the telcos may argue against payment of the fee.

According to the experts, the DoT would likely work on the merger while keeping it at utmost priority since this merger would earn the government substantial credibility in terms of ease of doing business. Especially in a scenario where a lot of bankruptcies and M&A-driven exits of telcos have happened due to extreme competition and dwindling financials, along with the loss of job of many, this merger might be a big deal for the government also.

This merger which is almost finished, will create the largest telecom company in India by merging Vodafone India and Idea Cellular with over 410 million customers under their name, nearly 42% customer market share and nearly 37% revenue market share. These numbers will definitely place the newly formed entity ahead of its competitors. The combined entity will also have a massive debt of Rs 1,14,426 crores as denoted by the data collected in March.

Read more on:

Arpit spends his day closely following the telecom and tech industry. A music connoisseur and a night owl, he also takes a deep interest in the Indian technology start-up scene and spends rest of his time spilling poetry and stories on paper.

guest
11 Comments
newest
oldest
Inline Feedbacks
View all comments

Recent Posts

Sony Alpha 7C Full-Frame Camera Launched in India, Price Starts at Rs 1,67,990

Sony has just launched its latest camera in the Alpha series in India namely Sonly Alpha 7C. As per the...

Chinese Vendors Might be Banned from Supplying Critical Telecom Equipment in India

Chinese vendors such as Huawei and ZTE might not have a bright future in the telecom industry of India. The...

Tata Sky Moves 18 English Movie Channels to New Slots, 13 Channels Set to be Moved Soon

Tata Sky, the largest Direct-to-Home (DTH) operator in India on Wednesday revised the electronic programming guide (EPG) numbers of 18...