DoT rejects Vodafone, Idea requests on dues

The Department of Telecommunications (DoT) has rejected Vodafone India and Idea Cellular’s requests to recalculate their dues, saying its numbers are fine and that India’s second- and third-ranked telcos should pay up to get a final seal of approval on their merger at the earliest.

“The department’s calculations seeking bank guarantees and cash payment from Idea Cellular and Vodafone India, respectively, are correct and have been communicated to the companies,” a senior DoT official told ET.

Under a conditional merger nod given two weeks ago, the DoT demanded Rs 7,268 crore upfront payment towards dues it said the two telcos owe it. It is split between a bank guarantee of Rs 3,342 crore on account of one-time spectrum charges claimed from Idea, and cash payment of Rs 3,926 crore towards market price for non-auctioned airwaves held by Vodafone India.

The two operators had then flagged some discrepancies in the figures and had requested DoT for recalculations. They were awaiting DoT’s response before taking a final call on paying up or challenging the dues.

“Now, it is up to them whether they want to move court or pay up immediately, which is in their interest if they want the deal to close quickly,” the person added. Idea is widely expected to challenge the demand, since a similar claim on Bharti Airtel while acquiring Telenor India was stayed by the Supreme Court.

DoT officials say that the department is fully prepared to contest any move by the two mobile phone operators to legally challenge the dues, and will go right up to the Supreme Court to challenge any adverse ruling in a lower court, a move which may delay the eventual completion of India’s largest M&A in the sector.

The completion of the deal has already crossed the deadline of June end set by the two companies. 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 KM Birla Group-owned Idea will also have to pledge that the telco, as the licence holder of the merged entity, will be responsible for paying Vodafone India’s one-time spectrum charges – presently stayed in the telecom tribunal – if and when such a decision is reached. Vodafone and Idea, which will merge to create India’s largest telco Vodafone Idea Ltd., didn’t respond to emailed queries for comment.

The new entity is expected to be better placed to take on competition from moneyed Reliance Jio Infocomm and Bharti Airtel. On their own, Idea and Vodafone have struggled to take on Jio and Airtel, widening their losses and losing revenue and subscriber market share.But the companies need to complete their merger at the earliest.