Indian telecom industry is soon going to witness the merger of No. 2 and No. 3 Carriers of the country. The merger of Idea and Vodafone will become the landmark move in the telecom sector as it will create country’s largest telecom firm.
After the merger, the joint venture will be known as Vodafone Idea Limited. The approval of the merger is in its final stages at Department of Telecommunications (DoT). The new name of the joint venture has been approved by DoT
This joint carrier will have a hold on 42% share of customs and 37% market revenue. The company will have an access to more spectrum than any other telecom operator.
In a statement by Idea Cellular, Bombay Stock Exchange was informed that “Change in the name of the company and issue of non-convertible securities in private placement basis… passed with a requisite majority,”
Vodafone and Idea will be raising Rs 15,000 crore through non-convertible securities Idea has reportedly raised 6,750 and Vodafone has already raised Rs 7, 390 crores through their existing investors. Captive business towers of both Vodafone and Idea has been bought by American Corp for Rs 7,850 crore.
Balessh Sharma will be heading the entity as the new CEO.
Issues – Finances and Spectrum
Idea and Vodafone both have to clear the joint debt of 1.14 lakh crore. The raised amount of 15,000 will be a big help to both operators in sorting out the debt situation.
Another issue that is creating the hindrance in DoT approval is the demand of Rs 11,000 crore by DoT. This amount needs to be paid if Idea and Vodafone want the approval on the merger. But if the verdict of the court goes again these telecom operators than paying such huge amount could be a challenge.
There is another issue related to the one-time spectrum charge (OTSC). For this the Idea Cellular is required to pay the charge for Vodafone and also their own charges, all this totals up to 1/5th of the entire amount.
With all these challenges it will surely take time to get the merger approved by DoT. The deadline of June 30 does seem like unachievable deadline now.
Although, as soon as the name of the merger was announced share price of Idea saw the rise by 3.02% to Rs. 57.90.
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