DoT demand: Idea, Vodafone may pay under protest

DoT demand: Idea, Vodafone may pay under protest

Will move court later; going for litigation first would have meant a potential delay in $23-billion merger.

XThe -billion merger deal between Idea Cellular and Vodafone India may soon get the final nod from the department of telecommunications (DoT) as the companies are likely to pay the Rs 7,268 crore in dues towards spectrum charges demanded from the government.

The $23-billion merger deal between Idea Cellular and Vodafone India may soon get the final nod from the department of telecommunications (DoT) as the companies are likely to pay the Rs 7,268 crore in dues towards spectrum charges demanded from the government. However, the companies are likely to pay the demand under protest, which means once the merger is approved by the DoT they will challenge the demand in court.

Of the Rs 7,268 crore demand raised by DoT, the contentious one that is likely to be challenged later is the Rs 3,322 crore raised on Idea towards one-time spectrum charge (OTSC) for spectrum held beyond 4.4 MHz. Idea Cellular had earlier obtained a stay order from the 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.

The balance Rs 3,926 that has been raised on Vodafone is not to be contested as it 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.

Though both the companies declined to comment on the matter, sources aware of the development said that the payment in the form of a bank guarantee is likely to be made as soon as DoT reverts to the companies’ request to recalculate the demand.

“They (the companies) have come back to us saying there is some difference of opinion in calculation of dues. So DoT is looking into it and we have not taken a view yet,” DoT secretary Aruna Sundararajan told PTI on Wednesday.

Vodafone and Idea Cellular had cited some difference of opinion on the way dues have been computed by DoT.

Earlier this month, DoT had granted conditional approval to the long-pending merger asking for the requisite payment.
The merged entity would be the country’s largest telecom operator with total revenues of over 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 Bank of America Merrill Lynch report 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

Read more on https://www.financialexpress.com/industry/dot-demand-idea-vodafone-may-pay-under-protest/1250106/

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