Telecom Ministry to Take a Final Decision on Idea Cellular’s 100% FDI Proposal

Commerce and Industry Minister Suresh Prabhu has finally said that the Telecom Ministry will take a decision on whether or not Idea Cellular will be granted with the permission for 100% FDI in the company, commerce and industry. However, things still remain twisted as the DoT has put some conditions while also taking inputs from the Department of Industrial Policy and Promotion (DIPP) on the said proposal of 100% FDI. PTI revealed that Prabhu said the following about Idea Cellular’s proposal on the FDI policy “The matter is completely in the domain of the line ministry. We have already clarified. No need of our approval.” Also, speaking about the tax liabilities and implying that they do not constitute additional conditions he spoke “We have sent back (the proposal) immediately. We have stated that it is for you to decide.”

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This new proposal from Idea comes at a very crucial time as the impending merger of Vodafone India and Idea Cellular is just around the corner. Post this merger the Idea-Vodafone merged entity will emerge as the largest telco in the country. Currently, the FDI policy outlines that an overseas firm is allowed to buy up to 49% stake in an Indian telecom company under the route of automatic approval, however, if a firm wants to buy more than 49% stake, then a special government approval is needed.

It was in last year after the very cut-throat competition between the telcos broke out that Idea and Vodafone announced their plans of merging together. This new entity will be worth $23 billion and will occupy 35% market share.

To give our readers an idea about how the Idea shareholding looks like in the current scenario – The foreign stakeholders hold about 34% including 7.49% in the promoters group and the rest are public shareholders. As for Vodafone India, the British telecom company Vodafone Group plc is a major stakeholder in the company. Therefore, when Vodafone and Idea will merge the foreign shareholding would breach the 49% approval limit. In this situation, it becomes essential that the company sought approval from the government.

As per the official announcement which broke the news of the merger, in the newly merged entity of both the companies, Vodafone will own 45.1% of the total company post paying for the 4.9% stake to Aditya Birla Group for Rs 3,900 crores in cash. After the Telecom Department added an additional condition to the proposal of FDI, the matter was forwarded to DIPP. Since the abolition of foreign investment promotion board (FIPB), the departments and ministries of 11 sectors, including telecom and print media, become the competent authorities for approval of FDI proposals unless there are some additions or rejection to make in the proposal being discussed.

Since similar situations are in sight for Idea Cellular, the company would have to move ahead with the matter to DIPP. It is noteworthy that the merged Idea-Vodafone entity will have a subscriber base of 41 crore accounting for 35% of market share. This new company would also own the largest spectrum holding of 1,850 MHz in the country.

After the merger, the combined company is also said to have a debt of 1.1 trillion as calculated according to debt situations of Idea and Vodafone in the month of September 2017.

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Nikhil Mumbai-Pune Recent comment authors
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Nikhil Mumbai-Pune
Nikhil Mumbai-Pune

Hopefully Idea launches VoLTE quickly and closes 2G within two years!!!!!

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