Customers gather around the reception area inside an Idea Cellular Ltd. mobile store in Mumbai (Photographer: Dhiraj Singh/Bloomberg)

Blow To Idea-Vodafone Merger As Telecom Department To Seek Rs 4,700 Crore

The mega-merger of Idea Cellular Ltd. and Vodafone India Ltd. may not meet the expected June 30 deadline as the Telecom Department is looking to raise a fresh demand of around Rs 4,700 crore, according to a person familiar with the development.

The demand will be raised from Vodafone India before its merger with Idea Cellular.

"Vodafone India had merged its arms into one company and there are dues of around Rs 4,700 crore related to one-time spectrum charges on the company. The Telecom Department will ask Vodafone to either clear dues or furnish bank guarantee before merger with Idea," the person said on condition of anonymity.

In 2015, Vodafone had merged its four subsidiaries — Vodafone East, Vodafone South, Vodafone Cellular and Vodafone Digilink — with Vodafone Mobile Services, which is now called Vodafone India.

The Telecom Department had then asked Vodafone to clear OTSC dues worth Rs 6,678 crore, which the company challenged in court. Following a Supreme Court order, Vodafone had paid only Rs 2,000 crore to get the deal cleared.

Telecom Minister Manoj Sinha is learnt to have asked the department to take legal opinion whether a demand regarding OTSC dues can be sought from Vodafone India.

"The department has received legal opinion which affirms that a demand can be raised from Vodafone," the person mentioned above said. The person said that final amount is still being worked out, which may involve interest and will likely be raised next week.

"The demand note will have to be drafted meticulously and complexity is involved. Therefore, the department needs some time," the person said. The demand will be in addition to bank guarantee of around Rs 2,100 crore that department will seek from Idea for OTSC dues.

Both Idea and Vodafone were expecting the merger deal to create India's largest telecom company to be completed by June 30, 2018.

The merger company is proposed to be named as Vodafone Idea Limited if approved by shareholders of Idea Cellular. It is estimated to have over 40 crore mobile customers from day 1 and 41 percent revenue market share.

Vodafone Group and existing promoters of Idea will hold 45.1 and 26 percent of the equity share capital of the merged company, respectively and the balance 28.9 percent will be held by the public shareholders.