DoT seeks legal opinion from ASG on Vodafone-Idea Cellular merger

The Department of Telecommunications (DoT) will seek further clarification from the additional solicitor general (ASG) regarding the Vodafone-Idea merger.

On being asked by Communications Minister Manoj Sinha, the DoT had written to the ASG seeking his opinion on whether the merger should be given a go-ahead without claiming the charges regarding spectrum, which were sub-judice. The ASG had opined that DoT can still raise a demand for such charges.

However, the department needs more clarity on the legal opinion, especially regarding the merger of subsidiaries of Vodafone in 2015. “We seek more clarity on the legal opinion. We will write to the ASG in a couple of days. It is a complex issue, so we need to understand it properly before proceeding,” a source in the DoT said.

After receiving the clarification, the DoT will prepare a demand notice to recover spectrum charges from both companies. The source said Idea Cellular can give a bank guarantee, whereas Vodafone will be asked to pay in cash. The DoT may issue a demand notice between Rs 45 billion and Rs 50 billion to Vodafone, whereas for Idea, the number could be about Rs 20 billion. The DoT wants to have finality on the issue of spectrum charges.

The demand by the DoT regarding one time spectrum charges (OTSC) was stayed by the Bombay High Court, but there was no final order. In 2015, Vodafone had merged its four subsidiaries—Vodafone East, Vodafone South, Vodafone Cellular and Vodafone Digilink with Vodafone Mobile Services, which is now called Vodafone India.

The DoT at that time had asked Vodafone to clear OTSC dues worth Rs 66.78 billion, but the firm challenged it in court.

Following Supreme Court directions, Vodafone had paid only Rs 20 billion to get the deal cleared. In a separate case, on directions from the Telecom Disputes Settlement and Appellate Tribunal (TDSAT), Vodafone paid another Rs 4.5 billion to DoT.

The merger of the two companies was expected to be completed by June- end but is set to be delayed by a few months because there is no clarity on the spectrum charges.

According to people aware of the plans of the two companies, Vodafone Idea Ltd — the name of the merged entity — was set to operate as one company from July 1. The new operator, which will be the country’s largest telco, will have a revenue market share of around 37 per cent, and around 433 million subscribers.

The merger, when completed, is expected to give a breather to both debt-ridden firms, which have been facing cut-throat competition in the market where margins have hit rock bottom. The latest entrant in telecom space, Reliance Jio, has disrupted the whole sector, forcing consolidation in what used to be 7-8 player market.

The delay in merger will however, diminish the savings that the two firms had hoped to achieve. The combined debt of both the companies is estimated to be around Rs 1.15 trillion, will be an added burden on the margins.