Idea proposal to raise FDI to 100% may get DoT nod within a week

NEW DELHI: The Department of Telecommunications (DoT) may clear Idea Cellular’s proposal to increase foreign direct investment (FDI) to 100% in the company within a week, having received all necessary documentation from the Aditya Birla group company and Vodafone India, senior officials said.

Approval to hike FDI limit in Idea would pave the way for the clearance of the merger between Idea Cellular and Vodafone India, leading to the formation of the largest mobile phone operator in India by revenue and subscriber market share.

“They have submitted all the documents… we want to clear it at the earliest, it should happen maybe within a week,” a senior official said about the clearance of the FDI proposal.

“After that there should be no hurdle for the merger,” the official said, adding that the merger itself may be approved in a few days after the FDI clearance. Idea Cellular and Vodafone India expect the merger, which will create a Rs 63,000 crore revenue entity, to close in June, a little over a year after announcing the deal in March 2017.

ET had reported earlier that since Vodafone India’s licenses will be merged into those of Idea Cellular, the No 3 carrier will have to take on the pending dues of the merged entity which it will be liable to pay to the telecom department.

This is a condition that DoT will weave in while granting the approval for FDI increase mentioned in the National Company Law Tribunal (NCLT) when it approved the merger.

Vodafone India and Idea Cellular collectively owe about Rs 18,870 crore in dues relating to a mix of pending licence fees, spectrum usage charges (SUC) and one-time spectrum charges (OTSC).

The government, though, won’t be able to force either the payment of their licence fee or SUC dues since the matter pertains to computation of a telco’s adjusted gross revenue (AGR), an issue under dispute for more than a decade and currently sub judice.

But a second DoT official said that as per the current M&A policy, since Idea Cellular was acquiring spectrum from Vodafone India, they would have to pay the market price of administratively allocated, or non-auctioned, spectrum irrespective of whether a court case is on or a stay has been granted before the merger is approved.

The official added that a recent report on the department accepting payment after the merger “doesn't hold ground. They (Idea) can either pay up or get a court order."

A senior industry executive said that a recent Supreme Court ruling disallowing DoT seeking bank guarantees in lieu of OTSC charges from Bharti Airtel may have a bearing on the merger of Vodafone-Idea deal as well, as the carriers may cite the order and argue against payment of the charge. Telenor India merged with Bharti.

The DoT though would want to clear the merger at the earliest since it would be a big feather in the government’s cap in the context of ease of doing business, especially with a lot of negativity currently surrounding the sector with bankruptcies and M&A-driven exits of telcos due to the rapid deterioration in financials since late 2016, leading to thousands of job losses, say experts.

The impeding merger of Vodafone India and Idea Cellular will create the country’s largest phone company with over 410 million customers, nearly 42% customer market share and nearly 37% revenue market share, leaving it stronger placed to take on competitive pressures unleashed by 4G newcomer Reliance Jio Infocomm.