DoT Seeking Legal Opinion For Vodafone-Idea Merger

Published on 20 Jun 2018 by Shivi

Idea and Vodafone India, on March 20, 2017, had announced that their respective boards had approved a merger of the two companies, which will be known as Vodafone-Idea Ltd. and will not include Vodafone's 42% stake in Indus Towers Ltd. This will create the largest telecom company in India by subscribers and by revenue. According to the terms of the deal, Vodafone will be holding 45.1% stake in the combined entity, 26% by the Aditya Birla Group and the remaining shares will be held by the public.

After been given the green signal from CCI, SEBI and NCLT, the Vodafone-Idea cellular merger received the approval from DoT on June 18 for raising the FDI limit to 100%. It was already decided by the two telecom giants that soon the cellular will be becoming the new entity as Vodafone-Idea Ltd in an extraordinary general meeting, which will be held on June 26 and will be passing a resolution seeking permission to raise Rs. 15,000 crore.

Now according to the sources, the Department of Telecommunications (DoT) is seeking legal opinion on the Vodafone-Idea Cellular merger in respect to Vodafone’s administratively allocated spectrum holdings. For such spectrum holdings of the acquired entity, the acquirer has to pay differential between the market’s determined price and the entry fee according to the merger and acquisition guidelines.

For the remaining period of the license validity, such payments have to be made for 4.4 MHz of spectrum on a pro-rata basis and such demands were raised by DoT, to Vodafone at the time of the merger of Vodafone group companies in 2015.

These demands were challenged by the Vodafone with the Telecom Disputes Settlement and Appellate Tribunal (TDSAT), but part of it (Rs 2,000 crore out of the Rs 6,700 crore) was paid on the directions of the Supreme Court.

As per the Industry sources, the issue now is that, with Vodafone being acquired by Idea, whether DoT should raise the demand on Idea Cellular of the differential amount.

And due to which DoT is seeking legal opinion on whether a fresh demand can be raised on Idea for the differential amount between the market determined price and the entry fee paid for 4.4 MHz of the administratively allocated spectrum of Vodafone and whether this would be willful disobedience of the court.

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