The proposed merger between Idea Cellular and Vodafone got the approval of India’s National Company Law Tribunal, with the rider that the merged entity will be liable to pay income tax on behalf of Vodafone India in case of a ruling that Vodafone India has to pay the arrears.
“Considering the entire facts and circumstances of the case and on perusal of the Scheme and the proceedings, it appears that the requirements of the provisions of sections 230-232 of the Companies Act, 2013 are satisfied. The Scheme is genuine and bona fide and in the interest of the shareholders and creditors,” the Ahmedabad Bench of the National Company Law Tribunal ruled on yesterday.
With this, the company has jumped through two of the hoops — NCLT and the competition commission — out of the four required for full approval.
Typically, a large merger deal of this type requires the approval of a high court, the Company Law Tribunal, the Department of Telecom and the Competition Commission of India.
Separately, an international arbitration tribunal will begin trial on Vodafone’s challenge to India using a retrospective legislation to seek Rs 22,100 crore in taxes, Vodafone Plc said in November.
The tribunal, headed by Sir Franklin Berman, was constituted in June 2016 after Vodafone challenged India using a 2012 legislation that gave it powers to retrospective tax deals like Vodafone’s $11 billion acquisition of 67% stake in the mobile phone business owned by Hutchison Whampoa in 2007.
“In case there is a finding that VIL (Vodafone India Ltd) is a representative assesse and that finding reached finality, then the income tax liability.. shall be the liability of ICL (Transferee Company),” the ICLT said in its order blessing the merger.
“The petitioner Transferee Company shall file an undertaking affidavit to that effect before this Tribunal within 30 days from the date of this order,” it added.
The merger is now likely to be complete in the first half of this year, possibly around the April-May time period.
Delays in the consummation of the merger could cost both companies dearly in a rapidly evolving wireless market in India.
The market has been turned upside down by the emergence of a new player, Reliance Jio, which is has slashed the price of data by 95%.
The merger is an attempt by the former No.2 and No.3 players to put up a unified front and achieve benefits of scale to compete against the newcomer.
The newcomer has around 130 mln active 4G customers, more than the rest of the Indian telecom industry put together.