The final approval to the biggest merger in the telecom industry between Vodafone India and Idea Cellular, which will create the largest telecom player in India surpassing Bharti Airtel may come within next few weeks.
The department of telecommunications on Thursday notified amendments to the merger and acquisitions guidelines by incorporating hike in spectrum cap limits which was approved by Cabinet in March this year.
The total spectrum holding limit was increased to 35% from 25%. A 50% cap on combined spectrum holdings in the 700 MHz, 800 MHz and 900 MHz bands (sub-1 GHz bands) was recommended by Telecom Commission and cleared by the Cabinet. Earlier, any merged entity was not allowed to hold over 25% of the spectrum allocated in a service area/circle and over 50% in a particular band.
This development will ease the approval process for Vodafone and Idea, as no undertaking will now be required for holding additional spectrum, according to sources from the DoT.
Following the Supreme Court’s dismissal of DoT’s petition challenging the order of telecom tribunal TDSAT which had directed the government to clear a deal between Bharti Airtel-Telenor without a bank guarantee of Rs 1,499 crore for one-time spectrum charges, it is learnt that DoT might not raise such a demand from Vodafone-Idea. But, a final decision on this is yet to be taken, sources said, as it is waiting for the legal department’s view on this matter.
According to estimates, Vodafone India and Idea Cellular collectively owe about Rs 19,000 crore dues as licence fees, spectrum usage charges (SUC) and one-time spectrum charges (OTSC) to DoT. The matter has been in court as there are differences in definition over adjusted gross revenues of a telecom player.
The approval from NCLT, the Competition Commission of India and the Securities and Exchange Board of India has already been in place for the merger. The final approval from DoT is expected to come in next two weeks, sources said.
DoT is also in the process of giving an approval to Idea’s proposal of increasing FDI limit in the company to 100%.
A new management for the combined entity has already been announced by the firms. In an email to users this month, Vodafone India’s managing director Sunil Sood said the merger will completely redefine the industry. He said with almost twice the number of network towers, users will enjoy our strong data network along with an over a million outlets and 12,000 stores.
Both the companies 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 has acquired Telenor India and announced the acquisition of wireless operations of Tata Group, while Reliance Jio has agreed to buy wireless assets of Reliance Communications and Aircel has filed for bankruptcy. Following the consolidation, telecom industry will be left with three players – Airtel, Vodafone-Idea combine and Reliance Jio along with telecom PSU BSNL/MTNL. – DNA