$23 bn merger of Vodafone, Idea to soon get Centre’s nod, both companies pay Rs 7268 cr towards spectrum charges

Source: Financial Express, Jul 24, 2018

New Delhi: The $23-billion merger of Idea Cellular and Vodafone India will soon get the final approval of the Department of Telecommunications (DoT) as both the companies have paid Rs 7,268-crore dues towards spectrum charges. “Vodafone and Idea have paid the dues under their heads, which is being processed now at the DoT,” an official source said.

Vodafone’s due of Rs 3,926 crore pertains to the entry fee and the auction determined price of the start-up spectrum of 4.4 Mhz, which needs to be paid in the event any company goes for an M&A. Idea’s Rs 3,322-crore due is related to the one-time spectrum charge (OTSC) for spectrum held beyond 4.4 Mhz.

Idea Cellular had earlier obtained a stay order from courts on paying this, but the merger and acquisition guidelines state that in the event of a judicial intervention, companies will have to furnish a bank guarantee of the said amount. Sources had earlier said the companies have decided to first pay and then challenge, rather than first contest the payment in the court, because the latter move would delay the merger. Earlier this month, the DoT had granted a conditional approval to the long-pending merger asking for the requisite payment.

The merged entity will be the country’s largest telecom operator with total revenue at more than Rs 80,000 crore, 437 million customers, 35% subscriber market share and 39% revenue market share. The combined debt of the Vodafone-Idea will stand at Rs 1.07 lakh crore, which according to a report of Bank of America Merrill Lynch would constrain their capex at around Rs 13,000-14,000 crore for the next couple of years. In contrast, the annual capex of Bharti Airtel is at around Rs 24,000 crore.

Once the merger is completed, the two would remove overlapping sites which would result in annual savings of around Rs 2,000 crore. The merged entity will hold 1850 MHz of spectrum, which will include 1645 Mhz of liberalised spectrum that is capable of building substantial mobile data capacity, utilising the largest broadband spectrum portfolio with 34 3G carriers and 129 4G carriers.

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