Consolidation Deferred: This Is Why Vodafone-Idea Merger Is Likely To Be Delayed

Jio changed Indian telecom. Arguably, the most important consequence of Jio’s entry has been the consolidation in the telecom sector. By late 2017, within a year of Jio launching its commercial services, four major players—Reliance Communications, Tata Tele, Telenor and Aircel—had already exited the field. By mid 2018, two giants, Vodafone and Idea has announced their merger.

Consolidation was on. The mega-merger was expected to be completed by 30 June 2018.

Until, reports came in that the Department of Telecom (DoT) was expected to recover One Time Spectrum Charges worth Rs 4,700 crore from Vodafone. According to this report in the Economic Times, an official source told PTI that the DoT “will ask Vodafone to either clear dues or furnish bank guarantee before merger with Idea”.

Union Minister of State (Independent Charge) For Communications, Manoj Sinha, is reported to have asked DoT to seek legal opinion on whether a demand to seek the dues can be made to Vodafone. The DoT is learnt to have replied in the affirmative.

Readers may also note that this is a phase when the industry is supposed to be under stress. Back in May, Vodafone India announced its fourth quarter 2017-18 results – as against a revenue of Rs 10,547 crore in the fourth quarter of 2016-17, this year’s revenue was Rs 7,902 crore – a 29 per cent drop.

Earlier, it was Airtel’s India operations that reported their first loss in 15 years – Rs 652 crore – in the fourth quarter of fiscal year 2018. Idea’s losses were reported to be Rs 4,141 crore recently.

Even the Economic Survey 2017-18 had said: “It is important to note that the telecom sector is going through a stress period with growing losses, debt pile, price war, reduced revenue and irrational spectrum costs.”

The decision of the DoT regarding Vodafone thus, has come at a critical time. Watch this space for more updates.