One of the most important and strategic deals of the year, the Idea Cellular and Vodafone India merger might hit a new roadblock as this latest news points out. The two big telecom giants of the country might have to push on the June 30 deadline of the merger as the DoT has been expected to raise a new demand of Rs 4,700 crore, a source said to PTI. Vodafone India will be raising the demand ahead of its merger with Idea Cellular. An official PTI source said “Vodafone India had merged its all arm into one company and there are dues of around Rs 4,700 crore related to one-time spectrum charges (OTSC) on the company. DoT will ask Vodafone to either clear dues or furnish bank guarantee before the merger with Idea.”
It was in 2015 when Vodafone merged its four subsidiaries – Vodafone East, Vodafone South, Vodafone Cellular and Vodafone Digilink with Vodafone Mobile Services. The entity is now known as Vodafone India. At that point of time, a demand of Rs 6,678 crore was raised from the Department of Telecommunications for One Time Spectrum Charges (OTSC) by Vodafone India. However, the telco challenged the demand in court, after which it was able to get the deal cleared in Rs 2,000 crore.
Now, with the Idea Cellular and Vodafone India merger in sight, the department is rethinking its options. Telecom minister, Manoj Sinha has likely urged the department to seek legal opinion whether or not raising the demand from Vodafone India will be right.
The source highlighted “The DoT has received legal opinion which affirms that demand can be raised from Vodafone.” He also said that the final amount of the demand is being worked out and it might also add the interest amount to it. The demand is likely to be raised next week.
The official remarked “DoT is working on fresh demand expeditiously and may issue it next week. The demand note will have to be drafted meticulously and there are lot of complexity involved. Therefore, DoT needs some time.”
The update by the said official also highlights that along with the demand, the DoT will be asking for a bank guarantee of Rs 2,100 crore that the department will be seeking from Idea Cellular for OTSC.
The newly formed entity which will be called Vodafone Idea Ltd (subject to Idea’s shareholder approval) will have over 40 crore mobile customers and will boast of 41% revenue market share under it. The merger for the same has been set to be completed by June 30, but like we mentioned, the date is likely to be postponed given the current developments.
In the combined entity, Vodafone Group will hold 45.1% while the existing promoters of Idea will hold 26% of the equity share capital of the merged company. The balance 28.9% will be held by the public shareholders.
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.