Supreme Court asks Vodafone to deposit Rs 2,000 crore for merging its 6 units
NEW DELHI: The Supreme Court directed Vodafone India to deposit Rs 2,000 crore with the department of telecommunications, paving the way for the phone company to go ahead with a three-year-old process to merge six group units amid a plan to revive an initial public offering.
Once Vodafone has paid up, DoT will issue the company a merger licence, speeding up a process initiated in 2012 that hit a bottleneck over dues demanded by the department.
A bench comprising Justices JS Khehar and R Banumathi asked the company to deposit the sum before the merger goes through. Vodafone’s final liability, if any, will be determined after litigation in various lower courts over the amount claimed by DoT is settled.
DoT had demanded Rs 6,930 crore from the company for the merger on various counts, including one-time spectrum fee, airwave usage charges and market-linked price for bandwidth under merger & acquisition rules. The company contested the demand at the Telecom Disputes Settlement and Appellate Tribunal, which late October ruled in favour of India’s No. 2 telco, provided it gave an undertaking that it would pay its dues as decided by the lower courts.
DoT challenged the TDSAT order in the Supreme Court, which on Monday arrived at the Rs 2,000 crore figure based on a February 12 letter to DoT in which the Indian unit of the UK’s Vodafone Group Plc offered to pay Rs 1,773 crore as an interim measure to move the merger process forward, while reserving the right to challenge it at a later date.
As an alternative, the court asked the company to deposit Rs 1,773 crore and show it all the points under which the demand was disputed. Vodafone chose the first option, fearing further delays in the merger.
Lawyers Asha Gopal Nair and Deepak Goel, who appeared for the government, confirmed this. Explaining the rationale of the order, Nair said the court had treated Rs 1,773 crore as the base value of the deal.
Vodafone India operates through a number of subsidiary companies in India. In 2012, it proposed to merge Vodafone East, Vodafone South, Vodafone Cellular and Vodafone Digilink with Vodafone Mobile Services. It also sought to merge Vodafone West and Vodafone Spacetel with Vodafone Services.
Vodafone first proposed the amalgamation in connection with a proposed initial public offering. However, the plan was dropped due to weak market conditions, regulatory uncertainty and an ongoing Rs 20,000-crore tax issue being fought between its parent company and the Indian government.
After getting approval from various courts for the merger – aimed at reducing inefficiencies – Vodafone’s application hit a roadblock in late 2013 at the DoT, which said the company had to convert permits in all circles to unified licences. This meant Vodafone needed to pay market-linked prices for airwaves in those circles which fell under the units. The telco cried foul, saying this would entail paying for airwaves already purchased.
Vodafone also claimed that the dues which DoT had sought from each of the circles related to factors such as one-time spectrum fee and spectrum usage charges were all in litigation in various courts and thus disputed the claimed amount.
Still, it offered to pay some Rs 1,000 crore towards converting permits under the units to unified licences and an additional amount of almost Rs 800 crore towards extending the term of its Chennai-Tamil Nadu permit to 2021 from 2015, making up the Rs 1,773 crore it offered to pay to DoT to facilitate the merger.
Monday’s ruling comes as Vodafone has revived plans for an IPO, preparations for which have already begun though a timeline has not been fixed. It recently announced a Rs 13,000 crore investment in India, underlining its commitment to a market that is among the fastest growing but has also tested the telco through a slew of tax cases, an uncertain regulatory environment and intense competition.
Read full article: Economic Times
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