Newly merged company Vodafone Idea Ltd drafted and sent a letter to the Department of Telecommunications (DoT) urging the authorities to recalculate the spectrum costs which the company had paid to get the merger cleared. To recall, Idea Cellular and Vodafone India had to pay up a sum of Rs 3,926.34 crore in cash to get the merger cleared from DoT. However, now the company is of the view that it was overcharged for the spectrum prices.
Discrepancies in Calculation of Charges: Vodafone Idea
An anonymous tip from a DoT official said, “They brought up a difference of opinion with DoT on indexation charges and prices they paid for spectrum in certain circles like Himachal Pradesh, Tamil Nadu and Bihar.” ET reported. When the airwaves are issued at government decided prices instead of an auction, indexation is done to bring the amount of spectrum to the current market price. Going by the books, it’s essential for the companies to liberalise their non-auctioned spectrum by paying the difference between the amount paid at the time of airwave allocation and the current market price for them to go through the merger.
The newly merged company also highlighted that there are discrepancies in the calculation done by the DoT since the department had calculated twice for spectrum related dues for Chennai and the rest of Tamil Nadu. Vodafone Idea argued that since the rate would depend on population, it wasn’t possible for the two numbers to be similar.
DoT Assures Diligence on Calculation
In reply to Vodafone Idea’s allegations, DoT official said, “We will look into this, but for us to give any further recommendations, we will also have to see calculations that have been done in case of other mergers.” As per the experts now, the matter is expected to escalate to the telecom tribunal and then onto Supreme Court for resolution.
Matter Likely to Escalate to Legal Battle
It’s noteworthy that the amount which Vodafone Idea Ltd mentioned in their letter is part of the bigger Rs 7,249 crore sum which the two companies had to pay to DoT as part of spectrum dues. DoT had put forth the condition for the approval of the merger, thus forcing the hands of the company to follow through.
Out of the total amount, the two companies paid Rs 3,926.34 crore in cash whereas the rest of the amount was furnished as bank guarantees, finally paving the way for the biggest M&A deal in the country which finalised on August 31st. However, the operator had paid the amount “under protest” meaning that it would contest the demand for One Time Spectrum Charges (OTSC) later in the telecom tribunal.
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.