Idea-Vodafone merger hits a snag as DoT looks to demand Rs 4,700 crore

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Idea-Vodafone merger hits a snag as DoT looks to demand Rs 4,700 crore

The demand will be raised from Vodafone India before its merger with Idea Cellular. This is more than likely to keep the mega-merger of the two telecom operators from being completed by the intended deadline of June 30.

The Department of Telecom (DoT) is reportedly looking to raise a fresh demand of around Rs 4,700 crore ahead of the merger deal between Vodafone India and Idea Cellular. The demand will be raised from Vodafone India before its merger with Idea Cellular, a PTI report said. This is more than likely to keep the mega-merger of the two telecom operators from being completed by the intended deadline of June 30.

"Vodafone India had merged all its arms into one company and there are dues of around Rs 4,700 crore related to one-time spectrum charges (OTSC) on the company. DoT will ask Vodafone to either clear dues or furnish bank guarantee before the merger with Idea," the report quoted an official source as saying.

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 it 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.

Following this, the Telecom Minister Manoj Sinha reportedly asked the DoT to take legal opinion whether a demand regarding OTSC dues can be sought from Vodafone India. "The DoT has received legal opinion which affirms that a demand can be raised from Vodafone," the source said.

The final amount to be quoted is still being worked out by the DoT, which might include interest as well. The Department will likely raise the demand next week. The demand will be in addition to bank guarantee of around Rs 2,100 crore that DoT will seek from Idea for OTSC dues.

"DoT is working on fresh demand expeditiously and may issue it next week. The demand note will have to be drafted meticulously and there are a lot of complexities involved. Therefore, DoT needs some time," the officer said.

Both Idea and Vodafone are planning to join forces to create India's largest telecom company. The move is being seen as a way to counter the highly competitive Indian telecom market. Both telcos were hoping to seal the deal by June 30, 2018.

The company formed after the merger is proposed to be named Vodafone Idea Limited if approved by shareholders of Idea Cellular. It is estimated to have over 40 crore mobile customers from day 1 and 41 per cent 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.

(With PTI inputs)