DoT seeks Rs 21 bn bank guarantee from Idea to clear merger with Vodafone

Telecom Secy Aruna Sundararajan had last month said that the clearances related to the merger of Vodafone and Idea Cellular are being expedited and that it "should get done" in the timeframe of June

The Department of Telecom (DoT) will seek a bank guarantee of around Rs 21 billion for clearing Idea Cellular's planned merger with Vodafone India, a government source said on Thursday.

"DoT will raise demand for around Rs 21 billion bank guarantee from Idea Cellular before a merger with Vodafone India. The amount pertains to one time spectrum fee of Idea Cellular. Idea Cellular will be asked to replace one-year bank guarantee of Vodafone India submitted for deferred spectrum payment," the government source told PTI.

The demand is expected to be raised by early next week, the source added.

Vodafone and Idea will have to give an undertaking of clearing dues that are sub-judice as per the decision of the courts, the source said.

Telecom Secretary Aruna Sundararajan had last month said that the clearances related to the mega-merger of Vodafone and Idea Cellular are being expedited and that it "should get done" in the timeframe of June outlined by the two companies.

Idea and Vodafone have decided to combine their operations to create the country's largest telecom operator worth over  $23 billion, with a 35 per cent market share.

Earlier this month, Idea Cellular had announced that the Telecom Department has approved raising the foreign direct investment limit in the company to 100 per cent, putting its merger deal with Vodafone in the last leg of regulatory clearance.

"Idea Cellular has received approval on its application to increase Foreign Direct Investment (FDI) limit in the company to 100 per cent, from the current 67.5 per cent, from the Department of Telecom (DoT) today," Idea had said in a statement on June 4.

The approval is for total foreign investment up to 100 per cent in Idea Cellular Ltd, and total indirect FDI in its relevant subsidiaries Aditya Birla Telecom Ltd and Idea Cellular Infrastructure Services Ltd, it had then said.

The FDI approval came as a major milestone in the merger process of Vodafone India with Idea Cellular and follows other statutory approvals received from Sebi, NSE, BSE, CCI and NCLT Mumbai and NCLT Ahmedabad.

Vodafone will own 45.1 per cent in the combined entity, while Aditya Birla Group would have 26 per cent and Idea shareholders 28.9 per cent.

The merged entity would be known as 'Vodafone Idea Ltd'.