DoT rejects Vodafone, Idea plea to recalculate dues; says ready to contest matter in court
The long-pending merger of Idea Cellular and Vodafone India had received a go-ahead from the DoT on July 10. The department says the dues demanded are just fine, and both these companies need to pay up at the earliest.
- Jul 18, 2018,
- Updated Jul 18, 2018 6:56 PM IST
The Department of Telecom has rejected the request of the merging telecom entities, Vodafone India and Idea Cellular, to recalculate Rs 7,268 crore worth of dues demanded from them. The department has said the dues demanded are just fine, and both these companies need to pay up at the earliest to start the merger process. The long-pending merger of Idea Cellular and Vodafone India had received a go-ahead from the DoT on July 10.
However, the department had also asked Idea to pay Rs 3,342 crore as bank guarantees - an amount that it owes to the government on account of one-time spectrum charges (OTSC) -- and Vodafone India to pay Rs 3,926 crore for the spectrum that it bought under administrative mechanism. OTSC, introduced in 2012, was levied, retrospectively and prospectively, on airwaves sold beyond 4.4 megahertz (MHz).
"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," the Economic Times quoted an official as saying.
Now it's expected the two telcos will approach the Telecom Disputes Settlement and Appellate Tribunal to oppose the DoT demand. However, the report also quoted DoT officials saying the department is fully prepared to contest the matter right up to the Supreme Court, a process that will delay the entire merger process, which is touted to be the biggest ever in the Indian telecom industry.
Both the companies had earlier claimed to complete the merger before June 30. The delay has blocked funds worth over $10 billion that will come along with the combined entity through cost and capital expenditure synergies. The telcos' estimate of earning opex savings of around $1 billion through the merger by FY20 would also start eroding.
Experts say the DoT demand is unjustifiable on two grounds. Firstly, the telcos have got stay orders from various high courts against the payment of OTSC to the DoT. Since the telcos are still contesting the matter, the demand for spectrum charges is untenable. Secondly, the apex court has recently overturned DoT's similar demand (of bank guarantees) from Airtel and Telenor India during the acquisition of Telenor by the former.
Interestingly, earlier this month, DoT received another setback when TDSAT directed DoT to release Rs 2,000-crore bank guarantees that Reliance Communications had provided for OTSC charges.
Both the companies have the combined debt of around Rs 1.14 lakh. With eroding customer base and declining revenues due to tough competition from Airtel and Reliance Jio, both the new entity need to infuse more capital to increase its 4G operations. Once approved, Idea-Vodafone will be the largest telecom entity in the country with a combined subscriber base of over 430 million, ahead of the current market leader Airtel.
The Department of Telecom has rejected the request of the merging telecom entities, Vodafone India and Idea Cellular, to recalculate Rs 7,268 crore worth of dues demanded from them. The department has said the dues demanded are just fine, and both these companies need to pay up at the earliest to start the merger process. The long-pending merger of Idea Cellular and Vodafone India had received a go-ahead from the DoT on July 10.
However, the department had also asked Idea to pay Rs 3,342 crore as bank guarantees - an amount that it owes to the government on account of one-time spectrum charges (OTSC) -- and Vodafone India to pay Rs 3,926 crore for the spectrum that it bought under administrative mechanism. OTSC, introduced in 2012, was levied, retrospectively and prospectively, on airwaves sold beyond 4.4 megahertz (MHz).
"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," the Economic Times quoted an official as saying.
Now it's expected the two telcos will approach the Telecom Disputes Settlement and Appellate Tribunal to oppose the DoT demand. However, the report also quoted DoT officials saying the department is fully prepared to contest the matter right up to the Supreme Court, a process that will delay the entire merger process, which is touted to be the biggest ever in the Indian telecom industry.
Both the companies had earlier claimed to complete the merger before June 30. The delay has blocked funds worth over $10 billion that will come along with the combined entity through cost and capital expenditure synergies. The telcos' estimate of earning opex savings of around $1 billion through the merger by FY20 would also start eroding.
Experts say the DoT demand is unjustifiable on two grounds. Firstly, the telcos have got stay orders from various high courts against the payment of OTSC to the DoT. Since the telcos are still contesting the matter, the demand for spectrum charges is untenable. Secondly, the apex court has recently overturned DoT's similar demand (of bank guarantees) from Airtel and Telenor India during the acquisition of Telenor by the former.
Interestingly, earlier this month, DoT received another setback when TDSAT directed DoT to release Rs 2,000-crore bank guarantees that Reliance Communications had provided for OTSC charges.
Both the companies have the combined debt of around Rs 1.14 lakh. With eroding customer base and declining revenues due to tough competition from Airtel and Reliance Jio, both the new entity need to infuse more capital to increase its 4G operations. Once approved, Idea-Vodafone will be the largest telecom entity in the country with a combined subscriber base of over 430 million, ahead of the current market leader Airtel.