Home > companies > people > Vodafone optimistic Idea merger will be completed by October, says CEO Vittorio Colao
Vodafone Group CEO Vittorio Colao. Photo: HT
Vodafone Group CEO Vittorio Colao. Photo: HT

Vodafone optimistic Idea merger will be completed by October, says CEO Vittorio Colao

Vodafone's bank guarantees, held by DoT for deferred spectrum payments, will have to be replaced by Idea

New Delhi: Vodafone Group Plc chief executive officer (CEO) Vittorio Colao has said on Tuesday that he is optimistic that the merger with Idea Cellular Ltd will be completed during his tenure.

“I am always optimistic, so the answer is yes because I am optimistic," said Colao, who will exit the British telecom company in October after a decade-long career at Vodafone. Nick Read, the chief financial officer, is slated to take over as the CEO.

Colao and Read were in New Delhi to meet telecom minister Manoj Sinha and telecom secretary Aruna Sundararajan.

The department of telecommunications (DoT) on Monday issued a letter of conditional approval for the merger with a demand of 3,900 crore in cash for transfer of unliberalized spectrum from Vodafone to Idea for airwaves up to 4.4 MHz and 3,300 crore in bank guarantees towards one-time spectrum charges arising on account of Idea’s unliberalized spectrum beyond 4.4 MHz.

“We are happy to get the letter and we look forward to a successful integration," Read said, when asked if the company was satisfied with the pace of progress of the merger.

Vodafone India’s existing bank guarantees, currently held by DoT for deferred spectrum payments, will also have to be replaced by Idea Cellular, and Vodafone India will need to provide undertakings to DoT on account of payments that are under judicial intervention from its past cases.

Once DoT’s demands are met, it will give its final approval for the merger. The National Company Law Tribunal, the Competition Commission of India and the Securities and Exchange Board of India have already given their approval.

The merger and acquisition guidelines state that the spectrum liberalization fees to be paid by Idea on account of transfer of airwaves up to 4.4 MHz from Vodafone to Idea are to be calculated on the basis of the difference between the entry fee and the market-determined price of spectrum from the date of approval of such arrangements by NCLT on a pro-rata basis for the remaining period of validity of the licence.

“This means the validity of the airwaves of the combined entity is shorter by six months (as compared to what they would be paying) as the merger got NCLT nod in January and we are in July right now. So essentially the companies are being penalized for this regulatory delay, which can become a bone of contention. Moreover, Idea can move the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) against the DoT’s demand for bank guarantee but it is unlikely to do that as rival telcos may benefit from any further delay because of litigation. It could submit the bank guarantee right now and challenge it after the merger is complete," said Saurav Kumar, partner, IndusLaw.

Read declined to comment on when the companies would deposit dues with DoT.

The merger was announced in March 2017 and will create India’s largest telecom firm in terms of subscribers, overtaking Bharti Airtel Ltd.

The companies expected the merger to be completed by June 2018.

“The impending merger of Vodafone and Idea, and the ensuing integration of the two may see some erosion of subscribers, giving an opportunity to other operators. Thus, we expect that a stable industry structure, with three operators holding more than 90% of the market share, to coincide with the stabilization of the Vodafone-Idea merger. Till such time, the pricing levels in the industry are unlikely to witness material improvement," said Harsh Jagnani, sector head and vice president, corporate ratings, ICRA Ltd.

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