Government gives conditional approval for Vodafone-Idea merger

New Delhi: The government has given conditional approval to the Vodafone-Idea merger, the UK-based telecom firm said on Tuesday. The department of telecommunication has approved the merger between Vodafone India Ltd and Idea Cellular, provided arrears amounting to as much as ₹ 7,250 crore ($1.1 billion) are paid to the government, according to the department’s order seen by Bloomberg. The outstanding amount is for spectrum.

The Vodafone-Idea merger will create India’s largest telecom company and help the firms compete with billionaire Mukesh Ambani’s Reliance Jio Infocomm Ltd., which upended the world’s second-largest mobile phone market by offering free calls and cheap data. Idea has reported losses every quarter since Reliance Jio started services in September 2016.

“Happy to get the merger letter,” Vodafone CEO-designate Nick Read told reporters after meeting with officials of India’s telecom ministry. “We will remain competitive.”

Of the total arrears to be paid, more than ₹ 3,900 crore is for aligning Vodafone’s spectrum, allocated at a fixed price in the pre-auction era, to market prices, while the rest is a one-time spectrum charge levied on billionaire Kumar Mangalam Birla-led Idea, according to a telecom department letter.

The Vodafone-Idea merger, announced in March 2017, will topple current market leader Bharti Airtel Ltd and create a behemoth with 438.8 million subscribers.