Idea Cellular Seeks Increased FDI in the Company from DIPP

Idea Cellular has proposed for granting the company with 100% Foreign Direct Investment (FDI) to Department of Industrial Policy and Promotion (DIPP). This new information comes into the light after Idea Cellular and Vodafone India have announced their plans of merging into a single entity, which will emerge as India’s biggest telecom operator. After the announcement of this merger, both the companies have gone forward with the step and made significant progress both on and off paper for the same. The merged entity will be worth over 23 billion with 35% market share. The current news where Idea Cellular has requested for more FDI in the company has surfaced because presently foreign direct investment policy allows an overseas firm to buy up to 49% stake in an Indian telecommunication company under automatic approval route but specific government approval is required for claiming stake above 49%.

Vodafone Idea

According to the current scenario, shareholding in Idea stands at around 34%, including 7.49% in promoter group and the rest as public shareholders. Whereas British telecom multinational Vodafone remains as a majority shareholder in Vodafone India.

After the merger, Vodafone will own 45.1% of the combined company even after transferring a 4.9% stake to Aditya Birla Group for Rs 3,900 crore in cash.

A government official also added his words saying, “We have received the proposal from the Department of Telecommunications. As the department has added a condition in the proposal, the matter has been referred to the DIPP. It is under consideration of the department.” This news is reported by Press Trust of India.

There is also the matter where the government is now awaiting DIPP’s decision on the same, where the merger will be allowed to go through only after DIPP raises the bar for FDI in the telecom company which will emerge. A second government official also quoted “Only FDI clearance for Idea is pending before the proposed merger with Vodafone (India) can go through,”

Post the abolishment of foreign investment promotion board all departments and 11 sectors which include telecommunications and print media have to put specific proposals to DIPP regarding FDI whenever they want to add some condition or reject the proposal. This new step is part of the same.

It is noteworthy that the merged Idea-Vodafone entity will have a massive subscriber base of 410 million along with being the second largest spectrum holding of 1,850 MHz in the country. The telecom giant is also expected to have a debt of around 1.1 lakh crore as per the evaluation of debt situation of Vodafone and Idea Cellular in September 2017. Also, the new merged telecom entity will replace Bharti Airtel from its number one spot.

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Prithvi
April 23, 2018 12:35 pm 12:35 PM

From the outside it looks like the merger depends on the approval of FDI clearance otherwise it’ll not go through. I think this is what the article suggests. Then in that case why couldn’t this be sorted out prior to going through all the processes OR is this the correct process itself i.e., this decision for FDI investment comes only after the procedure for merger has moved a few steps ahead!? Would be interesting to know this.

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