Government will give final approval to Vodafone and Idea for their merger once they complete the remaining formalities, telecom minister Manoj Sinha on Wedensday said.

“We have already approved the merger.. there were some formalities which Vodafone and Idea have to complete . Once the formalities are complete , we will give final nod “, Sinha told Financial Chronicle. 

On Tuesday Vodafone CEO (designate) Nick Read had said he looked forward to the successful integration with Idea.

This indicated that the British telco may have dropped the idea of legally challenging the payment  to move on with merger.  It hinted to have accepted the Department of Telecom’s conditional approval to its merger with Idea Cellular with a cash payment of Rs 3926  crore on account of spectrum price differential between entry fee and market price, a move which may mean the company may not challenge the demands legally.

“We are happy that we got the letter and we look forward to a successful integration,” Nick Read, Vodafone CEO designate had said after meeting Sinha, adding that the Vodafone Group was focused on the Indian market and would remain invested in India. The Birtish  telecom major Vodafone would invest about Rs 8,000 crore in the proposed joint venture with Idea Cellular, according to its annual report.

The combined operations of Idea and Vodafone will create the country’s largest telecom operator worth over USD 23 billion (or over Rs 1.5 lakh crore).  The total debt of the combined entity is around Rs 1.15 lakh crore .

Once the  merger is complete,  Vodafone-idea  will have 37.5 per cent  revenue market share and 39 per cent customer  market share or about 440 million subscribers, making them the number one telecom operator in India leaving the current incumbent Airtel behind. After  this consolidation,  there will be three private players – Vodafone-Idea, Airtel, Jio and  one set of  public operators (BSNL+MTNL) in line with their global peers.

The outgoing Vodafone Group chief executive officer Vittorio Colao and his successor Nick Read on Tuesday met telecom minister Manoj Sinha and secretary Aruna Sundararajan to customarily thank them for the approval and said the company is upbeat about India and will 'remain competitive'.

Their meeting  with the Indian government comes a day after the DoT gave a conditional approval to the long pending merger of Vodafone's India operations with that of Idea Cellular.

When asked to comment on the progress of Vodafone India's merger with Idea, Colao said, "We're always optimistic about India." Read added that the Group was focused on the Indian market and will "remain invested" here.

On the plans of the British telecom firm post the new entity comes in place, Read said: “We have always been a strong investor in India. We will remain that”.

The combined operations of Idea and Vodafone will create the country’s largest telecom operator worth over USD 23 billion (or over Rs 1.5 lakh crore),

According to the conditional approval, Vodafone has been asked to furnish a bank guarantee of about Rs 6,300 crore as deferred spectrum payment liabilities. Idea Cellular would have to pay a bank guarantee of Rs 3,322 crore as one-time spectrum charges (OTSC) and Rs 3,926 crore in cash for Vodafone spectrum under 4.4 MHz, as acquirer.

Idea will have to pay Rs 3,926 crore, which is the differential between the entry fee paid and the market determined price of 4.4 MHz spectrum assigned to Vodafone Mobile Services in the respective circles. This has to be paid on a pro-rata basis for the remaining part from the date of National Company Law Tribunal (NCLT) approval for the remaining licences.

In the conditional approval given by DoT on Monday, the total payment due on them are Rs 7,268 crore.

Among other conditions, Idea needs to replace Vodafone’s bank guarantees worth Rs 6,452 crore held by DoT with its own. This is on account of spectrum payments that fall due over the next one year.

The merger will result in a new entity, Vodafone Idea Ltd, which will be the largest Indian carrier and expected to be better placed to take on competition from moneyed Reliance Jio Infocomm and Bharti Airtel. 

All demands relating to the licences of the merging companies should be settled before taking the merger on record, while all disputes and sub-judice demands have to be borne by Idea Cellular.

Debt-ridden firms Idea and Vodafone India are in process of merging their businesses in India as it is expected to bring down cost of their operations and give them relief from cut-throat competition in the market where margins have hit rock bottom with free voice calls.

Vodafone Idea will have the capacity to provide 4G spectrum in all telecom circles of the country.