The demand notices for dues related to one-time spectrum charges will be sent to the companies next week
The Department of Telecommunications (DoT) is likely to raise a demand of around Rs 6,800 crore from Vodafone India and Idea Cellular before approving their merger.
The demand notices for dues related to one-time spectrum charges will be sent to the companies next week, a senior official from the department told DNA Money. While a notice for dues of Rs 4,700 crore is expected to be sent to Vodafone India, the rest will be sought from Idea Cellular.
DoT has decided not to take the recent Airtel-Telenor legal intervention as a benchmark to clear the Vodafone, Idea Cellular deal. "The Supreme Court has not stuck down the merger and acquisition guidelines. We are bound to raise demand notices for our dues as has been mandated in the guidelines. A due process is being followed before the approval," the official said.
The final figure is being worked out, though the estimates suggest a figure of Rs 6,500-6,800 crore from both the telecom firms, the official said.
DoT had earlier sought a legal view for raising demands.
However, it is learnt that the companies will move the court once the demand notice reaches them, according to sources.
The final approval to the merger between Vodafone India and Idea Cellular, which will create the largest telecom player in India surpassing Bharti Airtel, was expected to come this month, but now with the demand notices the deal might take another month to be fully approved.
The last approval has to come from the DoT, while the rest is already in place. DoT had recently approved increase in FDI limit in Idea Cellular to 100%, from the current 67.5% from DoT.
It is expected that the matter will go to the court again, sources said.
Vodafone and Idea Cellular had announced a merger last year, following the entry of a new player Reliance Jio owned by Mukesh Ambani which triggered a consolidation phase in the telecom industry forcing small and marginal players to exit the hyper-competitive market. Airtel acquired Telenor India and announced the acquisition of wireless operations of Tata Group, Reliance Jio has agreed to buy wireless assets of Reliance Communications and Aircel has filed for bankruptcy. Following consolidation, the telecom industry will be left with three players - Airtel, Vodafone-Idea combine and Reliance Jio along with a telecom PSU BSNL/MTNL.
An official from Cellular Operators Association of India says a delay is not good for the companies, it is bound to increase cost for them. It's been a year that the deal was announced and this last minute hurdle of demand notice does not augur well with the government's ease of doing business. "DoT could have taken the recent Airtel-Telenor deal as a precedent, but because of various concerns, the officials are not taking any decision independently, which is why, even a legal opinion was sought."
The analysts at HSBC Global Research had earlier predicted that Vodafone-Idea combined entity could save $900 million in operational expenditure in the next two fiscal years, but it will take over a year to close the 4G network gap with Bharti Airtel and Reliance Jio.
DELAYED CALL
- The demand notices for dues related to one-time spectrum charges will be sent to the companies next week
- DoT has decided not to take the recent Airtel-Telenor legal intervention as a benchmark to clear the Vodafone-Idea Cellular deal
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