The Vodafone-Idea merger will soon get the final approval of the Department of Telecommunications (DoT) as both the telecom operators have paid Rs 7,268-crore for the spectrum charges. The $ 23-billion merger is officially going through now that DoT is processing the dues paid by the companies.
Long-Pending Merger Got Conditional Approval Last Month
Idea got the stay order from courts earlier upon paying its due, but according to the merger and acquisition guidelines, “In the event of a judicial intervention, companies will have to furnish a bank guarantee of the said amount”. There had been reports that said the companies decided to pay their dues first and then challenge, instead of contesting the payment first in the court. The merger had already been pending for a long time and not paying the dues would have delayed it even further. Also, earlier this month, the merger got a conditional approval from DoT in return for agreeing to pay the requisite amount.
Vodafone’s share of Rs 3,926 crore is related to the entry fee and the auction-determined price of the start-up spectrum of 4.4 MHz. This amount needs to be paid in case any company decide to go for an M&A. Idea’s Rs 3,322-crore due pertains to the one-time spectrum charge (OTSC) for spectrum held beyond 4.4 MHz.
Vodafone-Idea Merged Unit will be the Largest Telecom Operator in the Country
After the merger, the Vodafone-Idea business unit will be the largest telecom operator in the country. The merged entity is expected to generate a total revenue of more than Rs 80,000 crore from a combined user-base of 437 million customers. Together, the telecom operators will have a 35% subscriber market share and 39% revenue market share. According to a report of Bank of America Merrill Lynch, the combined debt of the combined unit will stand at Rs 1.07 lakh crore, which would drive their capital expenditure at around Rs 13,000-14,000 crore for the next two years. On the other hand, the annual spending of Bharti Airtel to acquire assets lies somewhere around Rs 24,000 crore.
As soon as the merger goes through, the companies would take care of the overlapping sites and make a common platform for all the official announcements which will save them a whopping Rs 2,000 crore. The Vodafone-Idea unit will have access to 1850 MHz of spectrum, which will also include 1645 Mhz of liberalized spectrum. This spectrum is capable of building significant mobile data capacity while making the use of the largest broadband spectrum portfolio with a total of 129 4G carriers and 34 3G carriers.
New Entity to be Called Vodafone Idea Limited
The new entity will be called Vodafone Idea Limited post the merger. The shareholders of Idea Cellular have already agreed to the name the new entity ‘Vodafone Idea Limited’. The new name will be in effect right after the Vodafone India and Idea Cellular merger goes through. Vodafone is expected to own 45.1 percent of the share while 26 percent will go to Aditya Birla Group and the Idea shareholders will own 28.9 in the merged entity.
Earlier in March, this year, Vodafone Group and Idea Cellular announced the new leadership team of the would-be merged entity. Under the new leadership team, Kumar Mangalam Birla will serve as the non-executive Chairman and Balesh Sharma will remain the Chief Executive Officer of the merged business entity. Balesh Sharma is currently serving as Chief Operating Officer (CCO) of Vodafone India. He will be handling the combined business plans, execution and integration department of the merged unit. Idea and Vodafone have a huge subscriber base and it has significantly increased recently. The companies have remained active while rolling out new recharge plans, STVs, long-validity plans and postpaid plans to retain their customer base. The merger will only strengthen the postition of these telecom operators in the market. The introduction of cost-effective plans from Reliance Jio has triggered a price war in the telecom market and telecom operators have been trying hard to keep with the competitions. This merger also comes as a result of the price war in the telecom sector.
