The planned merger between two major mobile-phone service providers, Vodafone India and Idea Cellular, the latter owned by Aditya Birla Group, has cleared another hurdle with the payment of spectrum dues of 72.68 billion rupees (US$1.05 billion).
Though the two companies had earlier objected to this payment, they have now decided to pay first and then challenge, in order to avoid delays in the merger.
The $23 billion merger should soon get the final approval of the Indian Department of Telecommunications. Earlier this month, the DoT granted a conditional approval to the long-pending merger but asked for the requisite payment, Financial Express reports.
Vodafone’s dues of 39.26 billion rupees pertain to the entry fee and the auction-determined price of the start-up spectrum of 4.4 megahertz, which needs to be paid in the event a company goes for a merger or acquisition (M&A) deal.
Idea’s dues of 33.22 billion rupees are related to the one-time charge for spectrum held beyond 4.4MHz.
Once approved, the merged entity will be India’s largest telecom operator, with total annual revenue at more than 800 billion rupees, 437 million customers, 35% subscriber market share and 39% revenue market share. Once the merger is completed, the two will remove overlapping sites, which could result in annual savings of around 20 billion rupees.
However, a combined debt of 1.07 trillion rupees for the merged entity is a cause for concern, and analysts fear it could hamper its expansion plans.
There are also fears of job losses as the merged entity will look to save costs, eliminate duplication and improve efficiency. Employees with a poor performance record or job profiles that appear to be the same in the two companies are at higher risk.