SC asks Vodafone to pay Rs 2000 crore for merger

The report added that the court ordered the department of telecommunications to approve the merger of four firms with Vodafone Mobile Services, a subsidiary of Vodafone India.

The SC acted on a plea by the Centre challenging Telecom Disputes Settlement and Appellate Tribunal’s (TDSAT) November 6 order seeking DoT to “conditionally allow merger of licences sans asserting on payments of the impugned demands”.

As an alternative, the court had asked the company to deposit Rs 1,773 crore and show the court all the points under which it was disputing the demand. Explaining the rationale of the order, Nair said that the court had treated Rs 1,773 crore as the base value of the deal. Referring to the apex court verdict of February 2012, ASG Narsimha said the acquiring company had to pay the difference between the entry fee that the company being acquired had paid at the time of entry and the market price of the spectrum.

Vodafone India wants to merge Vodafone East, Vodafone Cellular, Vodafone South and Vodafone Digilink into VMSL as a precursor to what is expected to be one of the larger initial public offerings (IPO) in India. In 2012, it had proposed to merge Vodafone East, Vodafone South, Vodafone Cellular and Vodafone Digilink with Vodafone Mobile Services.

The merger has been approved by the respective high courts but the DoT has still not approved it because it treats it under its merger and acquisition norms for which the company needs to pay for spectrum charges as per auction-determined rates in addition to the one-time charges for spectrum in excess of 4.4 MHz. Appearing for Vodafone, they said the offer to pay Rs.1,773 crore was conditional and was not surviving today as approval for merger was not granted by March 9 as was sought then. The telco cried foul, saying this would entail paying for airwaves already purchased.

The bench of Justice Jagdish Singh Khekar and Justice R Banumathi ordering Vodafone to pay Rs 2,000 crore, said only then would the government clear the merger.

VMSL is an arm of Vodafone India, which, in turn, is a unit of Vodafone Group plc.

Vodafone needed to pay Rs.6,678 crore to the government under various heads for the merger to go through, Narasimha said. 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.