DoT okays Idea-Voda merger with riders Dept seeks Rs 3,926-cr one-time spectrum payment from UK co

The Department of Telecom (DoT) on Monday granted conditional approval to the long-pending merger of Vodafone India and Idea Cellular that will create the country's largest mobile services operator, an official source said.

"DoT has cleared the Vodafone-Idea merger on Monday. They will have to meet conditions for final approval,” the source said.

The department has asked for a payment of Rs 3,926 crore in cash pertaining to one-time spectrum charge of Vodafone. The amount can be paid either by Idea or Vodafone. The DoT has also asked Idea Cellular to furnish a combined bank guarantee of Rs 3,342 crore, the source further said.

The combined operations of Idea and Vodafone will create the country's largest telecom operator worth over $23 billion (or over Rs 1.5 lakh crore), with a 35 per cent market share and a subscriber base of around 430 million.

The merger is expected to give breather to both debtridden firms Idea and Vodafone, from cut-throat competition in the market where margins have hit rock bottom with free voice calls.

It will have the capacity to provide 4G spectrum in all telecom circles of the country. According to a presentation by Idea, the combined 4G spectrum of both the companies are capable of offering up to 450 megabit per second broadband speed on mobile phones in 12 Indian markets.

With the new entity coming in force, Bharti Airtel will lose the tag of India's biggest telecom service provider to the new entity which is proposed to be called as Vodafone Idea.

The combined debt of both the companies is estimated to be around Rs 1.15 lakh crore. Vodafone will own a 45.1 stake in the combined entity, while Kumar Mangalam Birla-led Aditya Birla Group would have 26 per cent and Idea shareholders 28.9 per cent. The Aditya Birla Group has the right to acquire up to a 9.5 per cent additional stake from Vodafone under an agreed mechanism with a view to equalising the shareholdings over time

If Vodafone and the Aditya Birla Group's shareholdings in the combined company are not equal after four years, Vodafone will sell down shares in the combined company to equalise its shareholding to that of the Aditya Birla Group over the following five-year period.