Telecom Department Seeks Rs 2,100 Crore Bank Guarantee Ahead of Idea-Vodafone Merger

A government official informed that the Department of Telecommunications (DoT) would be seeking a bank guarantee of Rs 2,100 crore for the clearance of the Idea Cellular and Vodafone India merger. The government official quoted “DoT will raise demand for around Rs 2,100 crore bank guarantee from Idea Cellular before the merger of Vodafone India. The amount pertains to one-time spectrum fee of Idea Cellular. Idea Cellular will be asked to replace one-year bank guarantee of Vodafone India submitted for deferred spectrum payment.”

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ET reported that an undertaking would be signed by Vodafone India and Idea Cellular for the clearance of dues which will be sub-judice as per the decision of the court, the source informed. He further said that the demand has been expected to be raised by next week.

The highest telecom authority of India, Telecom Commission secretary Aruna Sundararajan also said about the Idea-Vodafone merger and explained that the process would be hastened so that the entire clearance regarding the payment of dues is done in the June timeframe. Earlier, both the companies had set the month of June as a target month in which the clearance would be done.

Idea Cellular and Vodafone India will combine their operations to give rise to the largest telco in the country which will be worth $23 billion. The new combined entity will also have a whopping 35% market share.

The last green flag in the process of Idea Vodafone merger came when DoT raised the limit of FDI to full 100% from the lower previous limit. After the permission of 100% FDI, the two telcos can now approach the merger without any hurdle.

Idea Cellular, in its statement on June 4 said: “Idea Cellular has received approval on its application to increase Foreign Direct Investment (FDI) limit in the company to 100 per cent, from the current 67.5%, from the Department of Telecom (DoT) today.”

After a series of approval from the Sebi, NSE, BSE, CCI and NCLT Mumbai and NCLT Ahmedabad, the last nail in the coffin for the Idea Cellular and Vodafone India merger was the 100% FDI clearance by the DoT. The department has also allowed for total indirect FDI in its relevant subsidiaries – Aditya Birla Telecom Ltd and Idea Cellular Infrastructure Services Ltd also.

The merged entity which will be known as ‘Vodafone Idea Ltd.’ Will be made up by 45.1% Vodafone stake, while Aditya Birla Group would own 26% and Idea shareholders would own 28.9%.

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