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Department of Telecom conditionally approves Idea-Vodafone merger deal

The DoT nod is significant as reports suggest the process of the proposed deal is being closely watched by the PMO. Being one of the biggest merger deals in telecom makes it even more interesting for foreign investment companies looking for future deals in India.

twitter-logo BusinessToday.In   New Delhi     Last Updated: July 9, 2018  | 20:31 IST
Department of Telecom conditionally approves Idea-Vodafone merger deal

The Department of Telecom (DoT) on Monday gave its nod to the Vodafone India-Idea Cellular deal to form the biggest telecom entity in India, but with some riders. "DoT has cleared the Vodafone-Idea merger today. They will have to meet conditions for final approval," an official told PTI.

Earlier, it was reported the DoT was looking to raise a fresh demand of around Rs 4,700 crore ahead of the merger deal between Vodafone India and Idea Cellular over one-time spectrum charges on Vodafone. An ET report also claimed the Prime Minister's Office (PMO) had sought the details of the proposed deal between the two companies. Both the companies had earlier hoped to seal the deal before June 30, but the demand of Rs 4,700 crore as spectrum charges pushed the date further.

The DoT nod, however, is significant as reports suggest the process of the proposed deal is being closely watched by the PMO. Being one of the biggest merger deals in telecom -- and the involvement of Vodafone, whose parent company Vodafone UK had been caught up in a tax dispute with the Indian government -- makes it even more interesting for foreign investment companies looking for future deals in India. The clearance process also conveys a positive message of the ease of doing business in India, a prime goal of the Narendra Modi government to attract investments.

Demand for spectrum charges

Back in 2015, Vodafone had merged its four subsidiaries Vodafone East, Vodafone South, Vodafone Cellular and Vodafone Digilink with Vodafone Mobile Services. The resultant entity is now called Vodafone India. DoT had asked Vodafone to clear OTSC dues worth Rs 6,678 core at the time of consolidation, but the company challenged the demand in court. After the Supreme Court ruled in favour of DoT, Vodafone had paid only Rs 2,000 crore to get the merger deal with Idea cleared.

Both Idea and Vodafone are planning to join forces to create India's largest telecom company worth over Rs 1.5 lakh crore. The move is being seen as a way to counter the highly competitive Indian telecom market, disrupted after the entry of Mukesh Ambani-led Reliance Jio, which has been gaining ground with around 15.8 per cent market share by March 2018.

The company formed after the merger is proposed to be named Vodafone Idea Limited if approved by shareholders of Idea Cellular. The new entity will have over 40 crore mobile customers from day 1, and over 36 per cent of the revenue market share. Vodafone Group and existing promoters of Idea will hold 45.1 and 26 per cent of the equity share capital of the merged company, respectively, and the balance 28.9 per cent will be held by the public shareholders. As the combined debt of both the companies is around Rs 1.15 lakh crore, the merger would give new hopes for the new entity that will be the largest telecom company in India.

With agency inputs

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