British Telecom major Vodafone on Tuesday indicated to have accepted the Department of Telecom’s conditional approval to its merger with Idea Cellular with a cash payment of Rs 3,926 crore on account of spectrum price differential between entry fee and market price, a move which may mean the company may not challenge the demands legally.
But the company officials remain unavailable to respond to the queries on this if they would challenge this. Vodafone top management including its global CEO Vittorio Colao who was in India to meet the top government officials said they were looking forward to the successful integration with Idea Cellular.
“We are happy that we got the letter and we look forward to a successful integration,” Nick Read, Vodafone CEO designate told media after the meeting here, adding that the Vodafone Group was focused on the Indian market and would remain invested in India. The Birtish telecom major Vodafone would invest about Rs 8,000 crore in the proposed joint venture with Idea Cellular, according to its annual report.
The combined operations of Idea and Vodafone will create the country’s largest telecom operator worth over $23 billion (or over Rs 1.5 lakh crore). The total debt of the combined entity is around Rs 1.15 lakh crore.
Once the merger is complete, Vodafone-idea will have 37.5 per cent revenue market share and 39 per cent customer market share or about 440 million subscribers, making them the number one telecom operator in India leaving the current incumbent Airtel behind. After this consolidation, there will be three private players – Vodafone-Idea, Airtel, Jio and one set of public operators (BSNL+MTNL) in line with their global peers.
The outgoing Vodafone Group chief executive officer Vittorio Colao and his successor Nick Read on Tuesday met telecom minister Manoj Sinha and secretary Aruna Sundararajan to customarily thank them for the approval and said the company is upbeat about India and will ‘remain competitive’.
Their meeting with the Indian government comes a day after the DoT gave a conditional approval to the long pending merger of Vodafone’s India operations with that of Idea Cellular.
When asked to comment on the progress of Vodafone India’s merger with Idea, Colao said, “We’re always optimistic about India.” Read added that the Group was focused on the Indian market and will “remain invested” here.
On the plans of the British telecom firm post the new entity comes in place, Read said: “We have always been a strong investor in India. We will remain that”.
The combined operations of Idea and Vodafone will create the country’s largest telecom operator worth over $23 billion (or over Rs 1.5 lakh crore),
According to the conditional approval, Vodafone has been asked to furnish a bank guarantee of about Rs 6,300 crore as deferred spectrum payment liabilities. Idea Cellular would have to pay a bank guarantee of Rs 3,322 crore as one-time spectrum charges (OTSC) and Rs 3,926 crore in cash for Vodafone spectrum under 4.4 MHz, as acquirer.
Idea will have to pay Rs 3,926 crore, which is the differential between the entry fee paid and the market determined price of 4.4 MHz spectrum assigned to Vodafone Mobile Services in the respective circles. This has to be paid on a pro-rata basis for the remaining part from the date of National Company Law Tribunal (NCLT) approval for the remaining licences.
In the conditional approval given by DoT on Monday, the total payment due on them are Rs 7,268 crore.
Among other conditions, Idea needs to replace Vodafone’s bank guarantees worth Rs 6,452 crore held by DoT with its own. This is on account of spectrum payments that fall due over the next one year.
The merger will result in a new entity, Vodafone Idea Ltd, which will be the largest Indian carrier and expected to be better placed to take on competition from moneyed Reliance Jio Infocomm and Bharti Airtel.
All demands relating to the licences of the merging companies should be settled before taking the merger on record, while all disputes and sub-judice demands have to be borne by Idea Cellular.
Debt-ridden firms Idea and Vodafone India are in process of merging their businesses in India as it is expected to bring down cost of their operations and give them relief from cut-throat competition in the market where margins have hit rock bottom with free voice calls.
Vodafone Idea will have the capacity to provide 4G spectrum in all telecom circles of the country.
The combined debt of Vodafone India and Idea is estimated to be around Rs 1.15 lakh crore. Vodafone will own 45.1 stakes in the combined entity, while Kumar Mangalam Birla-led Aditya Birla Group will have 26 per cent and Idea shareholders 28.9 per cent.
The Aditya Birla Group has the right to acquire up to 9.5 per cent additional stake from Vodafone under an agreed mechanism with a view to equalising the shareholdings over time. Balesh Sharma will be the new CEO of the merged entity. Idea’s chief financial officer Akshaya Moondra will head the financial operations of the new entity as its CFO. Ambrish Jain, currently the deputy MD at Idea Cellular, is set to become the new chief operating officer.