DOT to seek ₹2,100 cr from Idea to clear Vodafone merger
NEW DELHI: The Department of Telecommunications (DOT) will insist on a bank guarantee for a little over ₹2,100 crore from Idea Cellular Ltd towards one-time spectrum charges as a precondition to approve its merger with Vodafone India, a person aware of the matter said.
The merger of Idea and Vodafone will create the world’s second-largest and India’s largest telco. It is aimed at dominating a market that Mukesh Ambani’s Reliance Jio Infocomm Ltd had disrupted with free voice calls and low data tariffs.
While the two companies have several unpaid dues, which are being challenged, Dot’s guidelines on mergers and acquisitions (M&A) empowers the department to insist on payment of one-time spectrum charges by the transferee company—in this case Idea Cellular.
“We cannot ask the companies for payments which are under judicial intervention, but we will ask the resultant merged entity to give an unequivocal undertaking to assume responsibility for such payments as and when the matter is resolved,” a person aware of the matter said requesting anonymity.
Moreover, the merged entity will also be responsible for payments to be made by Vodafone for one-time spectrum charges.
One-time spectrum charges are payable by companies which want to convert their administered spectrum or spectrum not bought in an auction to liberalised or auctioned spectrum. Auctioned spectrum can be deployed flexibly for any purpose unlike administered spectrum.
On Idea’s part, it can approach the Telecom Disputes Settlement and Appellate Tribunal for a stay against a DOT demand.
In a similar case, the tribunal had ordered DOT to clear the deal without demanding a ₹1,499 crore bank guarantee sought from Bharti Airtel Ltd for its acquisition of Telenor India. DOT had then approached the apex court, which last month dismissed its petition.
DOT, in any case, cannot insist on payments of licence fee and spectrum usage charges as these are calculated as a percentage of a telco’s adjusted gross revenue (AGR).
The merger will create the world’s secondlargest and India’s largest telco.