Idea Vodafone Merger: DoT Raises Demands for OTSC from Telcos

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The Government has finally made a move on the Idea-Vodafone merger and has said that now the ‘ball is in their court.’ Telecom Commission has raised the demands for dues to be repaid by both the telcos which are pending and amount to Rs 7,268 crores on account of One Time Spectrum Charges and Spectrum liberalisation. The authorities have also highlighted that a fast closing of the deal would mean a win-win situation for the government and the merging entities as well. An ET report highlighted that when questioned by reporters on Wednesday, Aruna Sundarajan, Telecom Secretary said, “We would like to see the merger completed at the earliest because we do want the sector to stabilise and this is an important step in that direction.” She said that amidst tough times in the industry which already remains under a debt of Rs 7 lakh crore, a faster decision on the Idea Vodafone merger would be a right call, and it would also lead to stability.

Vodafone India Cellular

Notably, the Idea-Vodafone merger which was signed off in March 2017 and was speculated to be completed by June 30 is the most significant merger that the industry has seen in decades. The Indian wing of the British company, Vodafone India and the Kumar Mangalam Birla led telco Idea Cellular will merge to form the biggest telco of the country which will even surpass Airtel (the current biggest telco) in subscriber base and many other areas.

Manoj Sinha, telecom minister, also commented on the ongoing events of the merger. Earlier on the same day, he said “Merger is already approved. There are formalities that both Vodafone and Idea have to complete now.” He emphasised the fact that now the action to be taken was on the telcos’ behalf. It is noteworthy that on Tuesday the minister had met Vodafone Group’s chief executive officer-designate Nick Read along with outgoing executive Vittorio Colao and Vodafone India managing director Sunil Sood. He also added that the involved executives had thanked him for the fast course of action which the department took.

Idea Cellular in its official statement said that the nod given by the DoT is a conditional one. The announcement by the telco read “Approval of the DoT was a condition precedent to the completion of the merger. The current approval of DoT is conditional and not the final approval.”

In its conditions put forth by the DoT, the authority has asked Idea to provide a bank guarantee of Rs 3,342 crore for one-time spectrum charges (OTSC) and Vodafone to pay Rs 3,926 crore in cash to cover the market price for non-auctioned airwaves. The department is also of the opinion that Idea Cellular will also have to replace Vodafone’s bank guarantees of Rs 6,452 crore for spectrum payments which will be due in the coming year.

Also, separately a matter remains pending in the tribunal which is again conditional on Idea cellular taking responsibility for Vodafone India’s OTSC. All other cases built on the ground of payment for spectrum charges will also have to be paid off by the merged entity. Now it remains to be seen whether the telcos pay the demand asked by the DoT or they fight the offer in court.

The newly merged entity, being called as Vodafone Idea Limited is expected to take over the current largest telco of the country, Bharti Airtel. The merger will prepare the telcos to compete better for market share and against poor financials which struck the operators after Reliance Jio entered the market in September 2016.

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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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