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25 Jul, 18
25 Jul, 18
Idea Vodafone merger, India

Vodafone-Idea merger in its final stage

Vodafone-Idea have paid Rs 7,268 crore to the Department of Telecommunications as part of a key condition required for final approval of the merger.

By Zimble Digital

VodafoneVodafone and Idea pay their conditional dues to get approval from Department of Telecom.

Vodafone India and Idea Cellular have paid Rs 7,268 crore to the Department of Telecommunications (DoT) as part of a key condition required for final approval of the merger. The payment of the demand means that the final obstacle has been cleared in the largest mergers and acquisitions transaction in the Indian telecom sector.

“Idea has submitted its compliance to the DoT’s conditional approval letter dated July 9 2018, for the merger of Vodafone India Ltd and Vodafone Mobile Services Ltd with Idea Cellular Ltd, including the payment of Rs 3,926.34 crore (in cash) and bank guarantee of Rs 3,322.44 crore,” an Idea spokesperson told the Economic Times. The spokesperson added, “With this we hope to get final approval from DoT for the merger at the earliest.”

As per a report in Business Standard, both firms have sought a recalculation of dues, and the DoT is yet to respond. However, to avoid a delay in the final approval, the companies decided to pay the entire amount, a source told the Business Standard. An analyst was of the opinion that any further delay in the merger could have cost both companies heavily.

The merger involving the two companies will create India’s largest telecom operator. The combined entity is expected to be worth more than $23 billion with a market share of 35 percent and a subscriber base of approximately 430 million. The merger is likely to give tough competition to Reliance Jio Infocomm Ltd, as the Mukesh Ambani-led conglomerate occupies a lion’s share in the Indian telecom space.

DoT previously gave conditional approval

On July 10, the Economic Times reported that the DoT conditionally approved the merger. The conditions for the approval included a payment of Rs 7,268 crore. The demand was divided between a bank guarantee of Rs 3,342 crore to cover Idea’s dues concerning one-time spectrum charges and Rs 3,926 crore by Vodafone towards the market price for non-auctioned airwaves, people privy to the matter said.

“Once the companies pay up, the department will begin the transfer of Vodafone India’s licences and Vodafone Mobile Services Ltd.’s licences to Idea Cellular, which will complete the merger,” a senior official said, as per the Economic Times. The report further mentioned that Idea was likely to challenge the demand since a similar condition on Bharti Airtel was stayed by the Supreme Court.

Both companies flagged the amount for some discrepancies and urged the DoT to recalculate the amount. The DoT, however, rejected their requests and said that the numbers are fine. The department added that both companies will have to pay up to obtain final approval.

“The department’s calculations seeking bank guarantees and cash payment from Idea Cellular and Vodafone India, respectively, are correct and have been communicated to the companies,” a senior official from the DoT told the Economic Times. The official added, “Now, it is up to them whether they want to move court or pay up immediately, which is in their interest if they want the deal to close quickly.”

On July 19, the Financial Express reported that both companies were likely to pay the demand under protest. This meant that the demand will be challenged in court after the merger is approved by the DoT. Sources claimed that the companies have decided to pay first and then challenge, as they wish to avoid unnecessary delays in the merger.

The merger

The merger is believed to have been finalised after telecom minister Manoj Sinha signed off on the merger. The conditional approval would see India’s second and third largest telecom companies come together to form the country’s largest carrier.

Vodafone is expected to own 45.1 percent of the combined entity, while the Aditya Birla Group will own 26 percent. Idea shareholders will get 28.9 shares.


Elton Gomes is a staff writer at Qrius 

 

 

 

 

 

 

 

 

 

 

 

 


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