Idea seeks telecom department’s nod for merger with Vodafone

NEW DELHI: Idea Cellular has sought the telecom department’s nod for its proposed $23-billion merger with Vodafone India, which will create the country’s largest telco by subscriber and revenue market share, a person aware of the development said.

“Idea filed for approval late last week,” the person said. Idea and Vodafone did not respond to emails seeking to confirm the development as of press time on Tuesday.

The telecom department (DoT) typically takes 45-60 days for giving necessary approvals for merger, unless complications or clarifications are needed from merging parties.

Vodafone and Idea have already received approval of anti-monopoly watchdog Competition Commission of India. Market regulator Securities and Exchange Board of India (Sebi) and stock exchanges have given a conditional go-ahead to the deal, subject to the outcome of an ongoing probe by the regulator on allegations of purchase of Idea shares by one of its promoters just prior to the merger announcement.

Vodafone and Idea have also moved separate National Company Law Tribunal (NCLT) benches for approvals. The Ahmedabad NCLT bench recently told Idea to hold a meeting with shareholders and creditors on October 12, where they will vote for or against the merger.

The country’s second and third largest telcos are facing a tough time matching up to rock bottom tariffs offered by newcomer Reliance Jio Infocomm, which disrupted the market with free voice and data offers for about six months after it started services in September last year.

In July, the two telcos together lost 3.7 million subscribers, according to data from industry body Cellular Operators Association of India. The companies expect the merger — announced in March — to close in 2018, after which the combined entity will have almost 400 million customers and a 41 per cent revenue market share.

UK’s Vodafone Group will have 50 per cent stake in the merged entity while Idea promoters Aditya Birla Group will have 21 per cent. Under the terms, Aditya Birla Group will have the right to gradually increase its stake in the combined entity, while Vodafone will reduce its holdings, with both partners eventually owning equal stakes.

The merger will have to adhere to spectrum cap rules set by the government, as per which an operator can only hold a maximum 25 per cent of the total spectrum allotted in a circle and up to 50 per cent of the airwaves allotted in any one bandwidth.

The combined entity, therefore, may have to either surrender or sell off some spectrum in 900 MHz band in Maharashtra, Gujarat, Kerala, Haryana and UP West and in 2500 MHz band in Maharashtra and Gujarat, within a year of closing the deal. Aditya Birla Group chairman Kumar Mangalam Birla was named the chairman of the new entity.

Vodafone would appoint the chief financial officer. The two companies would jointly choose CEO and operations head before closure of merger. The new combined entity will remain listed and be renamed later.

The promoters of Idea and Vodafone would have the right to nominate three members each on the board, which will have 12 directors, six of whom will be independent.