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Vodafone-Idea Deal Cleared, Government To Be Paid Rs 72 Billion In Dues

Of the total arrears to be paid, more than Rs 39 billion is for aligning Vodafone's airwaves, allocated in the pre-auction era, to market prices.

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Vodafone-Idea Deal Cleared, Government To Be Paid Rs 72 Billion In Dues

Vodafone-Idea combination will help the firms compete with Mukesh Ambani's Reliance Jio.

Highlights

  1. The combination will create India's largest mobile-phone company
  2. About Rs 33 billion in arrears is a spectrum charge levied on Idea
  3. The merger will topple current market leader Bharti Airtel

Vodafone Group Plc said it received approval from the government to combine with Idea Cellular Ltd., a deal first announced 16 months ago.

The Department of Telecommunication has approved the merger provided arrears amounting to as much as Rs 72.5 billion ($1.1 billion) are paid to the government, according to the department's order seen by Bloomberg. The outstanding amount is for airwaves.

The combination will create India's largest mobile-phone 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 Jio started services in September 2016.

"Happy to get the merger letter," Vodafone Chief Executive Officer-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 Rs 39 billion is for aligning Vodafone's airwaves, 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's letter.

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

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