DoT Asks Vodafone India and Idea Cellular to Clear the Pending Rs 19,000 Crore Dues Before Merger

By April 14th, 2018 AT 11:41 AM

The much anticipated Vodafone India and Idea Cellular merger seems to have hit a major roadblock. As a pre-condition for clearing their mega-merger, the Department of Telecom (DoT) is likely to ask Vodafone and Idea to collectively clear dues of nearly $3 billion or Rs 18,870 crore relating to a mix of pending licence fees, spectrum usage charges (SUC) and one-time spectrum charges (OTSC), reports Economic Times.

Vodafone Idea

Vodafone India’s licence fee and SUC dues are roughly Rs 5,532 crore while its OTSC dues are about Rs 3,600 crore. Idea’s total licence fee/SUC dues, in turn, is roughly Rs 7,625 crore while its OTSC dues are Rs 2,113 crore.

An executive at one of the two companies said the government won’t be able to force either of the two companies to pay their license fee or SUC dues, since this pertains to computation of a telecom’s adjusted gross revenue (AGR), a matter has been under dispute for more than a decade and is currently sub-judice.

However, the DoT doesn’t seem to agree, with an official saying demand notices will be sent to both companies shortly for approximately Rs 19000 crore.

The report further highlights that even if the licence fee and SUC due demands are legally challenged, the telecom department would insist on bank guarantees for OSTC dues worth nearly Rs 5,713 crore as it adheres to present telecom merger and acquisition (M&A) rules in this case.

This indication comes despite the face that OSTC dues matter along with licensee fee and SUC is also currently being heard in court. It should be noted that average gross revenue or AGR is s the amount of revenue derived from licensed services. Ideally, a telecom operator pays 8% of AGR as license fee and 5% as SUC charges.

Earlier, a senior DoT official told ET that Idea is seeking 100% FDI in the company and is already in discussions with telecom department on behalf of both companies to determine the total dues to be paid before the merger is approved. This is because Idea would continue to be the licensee post-merger with Vodafone India.

Sources say that Vodafone might be required to clear its near Rs 3,600-crore OTSC dues to DoT at the earliest as an identity will not exist after the merger. On the other hand, Idea being the acquirer will be allowed to submit bank guarantees equivalent to its bills.

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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