India

Clasis Law In-House Community India Legal Updates
14th Floor, Gopal Das Bhawan, 28, Barakhamba Road, New Delhi 110 001India
Tel: (91) 11 4213 0000 / Fax: (91) 11 4213 0099
Email: gaurav.wahie@clasislaw.com  •  lovejeet.singh@clasislaw.com   Web: www.clasislaw.com

v14i7_Jur_IndiaVodafone India is in discussions with Idea Cellular for an all-share merger. It appears that the intense competition the Indian telecom industry is facing due to freebies offered by the new entrant, Reliance Jio, has nudged this consolidation move. If the merger goes through, it will create India’s largest telecom company. However, regulatory challenges could impede a smooth merger.

The proposed deal will require approvals from several regulators, such as the Department of Telecommunications (DoT), Competition Commission of India (CCI) and National Company Law Tribunal (NCLT).

Approval from DoT
The DoT’s M&A guidelines (Guidelines for Transfer/Merger of various categories of Telecommunication service licence/authorisation under Unified Licence on compromises, arrangements and amalgamation of the companies) provide that companies should notify the proposal of a merger to the DoT as filed before the NCLT.
The guidelines lay down that the merged entity cannot hold more than 25 percent of the total spectrum assigned for access services and 50 percent of the spectrum assigned in a given band in the concerned service area. The M&A Guidelines further provide that the merged entity must surrender the excess spectrum within a period of one year from the permission being granted.

In the alternative, the merged entity can either sell or share the excess spectrum with other telecom operators.
Further, the M&A guidelines provide that the merged entity can have up to 50 percent market share in any service area calculated on the basis of the subscriber base and adjusted gross revenue. In case the market share exceeds 50 percent, then it should be reduced to the specified limit within a period of one year from the date of approval of merger.

It is expected that the Vodafone Idea merged entity may exceed the prescribed limits for spectrum and market share in several circles as both the companies have significant market share in India.

Approval from CCI
The proposed merger would also require approval from CCI as it is likely that the merger will exceed the assets or turnover thresholds prescribed under the Competition Act, 2002.

Considering that the proposed merger will make the largest telecom company in India, the merged entity may enjoy a dominant position in a few circles. CCI, while granting the approval, will closely consider that there is no appreciable adverse effect on competition by the merged entity.

Though CCI has a good track record in terms of approving mergers, there have been instances where CCI has recommended certain modifications, including divestiture before approving the merger, where it felt that there may be an appreciable adverse effect on competition.

In the merger of Sun Pharma and Ranbaxy Laboratories, CCI was of the prima facie opinion that the merger will likely cause appreciable adverse effect on competition as there were horizontal overlaps between the products.

In this matter, CCI investigated relevant markets on the basis of combined market share and incremental market share of the merged entities, and market share of the competitors and significant players, among other factors.

CCI proposed certain modifications and approved the merger subject to the parties carrying out divestiture of their products relating to seven relevant markets.

Similarly, in the acquisition of the film exhibition business of DLF Utilities by PVR, CCI proposed divestment of certain assets. However, the parties proposed amendments saying divestiture was unviable, and the CCI approved the combination without the requirement of making any divestiture.

Considering the above precedents and the fact that Vodafone and Idea are significant market players, CCI may consider approving the merger with riders and modifications.

Approval from NCLT
The proposed merger will be dealt with by the newly constituted NCLT and will be governed by the provisions of the Companies Act, 2013 as the provisions relating to compromises, arrangements and amalgamations were notified in December 2016. Prior to this, such schemes were approved by the High Courts in India.

Conclusion
While the merger is still in the discussion stage, the parties can expect regulatory hurdles as discussed above in the event they decide to proceed with the transaction. In addition to this, Vodafone’s unresolved tax dispute could be another challenge for the merged entity.

Related Articles by Firm
Clasis Law Newsletter
The latest legal news from India, including recent court judgments, changes to corporate/commercial law and updates on projects and IP.
Initial Coin Offerings: Another brainteaser in the virtual currency bandwagon
The position of virtual currencies and ICOs in India remains murky.
The impact of General Data Protection Regulations on Indian companies
Extraterritorial applicability of GDPR makes it clear that these regulations will be applicable regardless of whether the processing takes place in EU or not.
ONGC vs Sime Darby consortium
An unsuccessful party cannot possibly apply for interim relief in aid of what it lost before the arbitral tribunal.
The Fugitive Economic Offenders Bill 2018
The bill aims to provide an effective, expeditious and constitutionally permissible deterrent to ensure that such actions are curbed.
Understanding The Maharashtra Shops And Establishments Rules 2018
The Act regulates the employer–employee relationship and service conditions such as hours of work, payment of wages, overtime, leave, holidays, etc.
Supreme Court gives clarity on Section 26 of the Arbitration and Conciliation (Amendment) Act, 2015
In Board of Control for Cricket in India vs Kochi Cricket, the Supreme Court has clarified some issues surrounding the Act.
Delhi High Court resolves uncertainty between two conflicting clauses in contracts
The settled principle of contra proferentem has been re-affirmed by the Court in a case involving Delhi Metro Rail and Voestalpine.
India: Supreme Court update
Supreme Court refers the question to determine the liability of the consignee or steamer agent in respect of ground rent charges to be paid to the port trust to a larger bench ...
Corporate Social Responsibility
There is a growing realization among the corporates that business growth along with positive community/social impact is now an expected goal ...
India: Execution Proceedings for Enforcement of Arbitral Award
Recent Supreme Court judgement resolves certain issues and requirements ...
India: Impact of the Companies (Amendment) Act, 2017
With the assent of the President on January 3, 2018, the much-awaited Companies (Amendment) Act, 2017 (Amendment Act), which provides for simpler provisions but stringent penalties, has finally seen the light of the day ...
Voluntary Liquidation in India
Winding up under Insolvency and Bankruptcy Code, 2016 ...
Strike Off of Companies in India
Over the years, many companies have been lagging behind in filing of annual documents such as annual returns, financial statements etc ...
India: Valuation by Registered Valuer
“Price is what you pay, Value is what you get” ...
India: Amendments Under Master Directions on Issuance and Operation of Prepaid Payment by RBI
Digital wallets such as PayTM, along with debit and credit cards, are expected to reduce (if not completely replace) the use of paper currency …
India: Institutional Arbitration – Need of the Hour
The need to promote and encourage institutional arbitration for commercial disputes in India ...
India: Supreme Court settles the law: Major relief for foreign operational creditors
Clasis Law recently represented Macquarie Bank in two civil appeals before the Supreme Court of India ...
India: Consumer Protection
NCDRC’s ruling on ‘Voluntary Consumer Association’ under the Consumer Protection Act, 1986 ...
India: Foreign Exchange Management Regulation
Significant changes for transfer or issue of security to a person resident outside India ...
India: Directors' duties and liabilities under the Companies Act, 2013
Directors must be aware of their role, responsibilities and duties towards the company and its shareholders ...
India Update for December 2017
This edition brings to our readers a featured article titled “The Tourism and Hospitality Sector 2017 — The Year Gone By!!”
The tourism and hospitality sector 2017 — the year gone by
This year several policy decisions and judicial pronouncements affecting the tourism and hospitality sector were implemented. We have set out below some of the key developments and their effect on the sector ...
India: RBI issues Directions on Peer to Peer Lending Platform
Online lending transactions are in their nascent stage in India and given the increase in peer-to-peer (P2P) lending through e-commerce marketplace it is of extreme importance to regulate such transactions ...
INDIA: Right to privacy and data protection in India
The concept of data protection and privacy has not been addressed in any exclusive comprehensive legislation in India ...
India: Protection against groundless threats under Indian IP laws
Rapidly growing awareness of intellectual property (IP) rights and a well-structured statutory regime protecting IP has allowed rights owners to assert and enjoy the limited monopolies conferred on them ...
RBI granted powers to act on the resolution of stressed assets
By way of a circular dated May 5, 2017 (Circular), the Reserve Bank of India (RBI) amended the Framework for Revitalising Distressed Assets in the Economy ...
India Update for May 2017
The May 2017 India newsletter from Clasis Law includes an article on “Corporate Compliances: Necessity and Implication”, as well as Banking, Projects, Energy & Natural Resources and IP updates ...
Corporate compliance: Necessity and implication
The Companies Act of India is the primary legislation governing the functioning of companies established in India during their lifecycle....
India update from Clasis Law
Including briefings on the national food processing policy, projects and energy, and intellectual property.
RBI intervenes in patching up of Tata and DoCoMo’s joint venture
Background to the joint venture: Tata DoCoMo, an Indian mobile network operator, was set up as a joint venture between Tata Teleservices (TTSL) and NTT DoCoMo in November 2008...
India Update, inc: Regulatory challenges for Vodafone Idea merger
This months India newsletter from Clasis Law includes an article on the “Regulatory challenges for Vodafone Idea merger”, plus updates in Projects, Energy, IP and Banking & Finance ...
Investment conditions and restrictions for venture capital funds
Venture capital funds (VCFs) are contributing considerably to India’s economic growth. The amount of investment directed to venture capital has grown in recent years due to the pro-business environment and ...
India’s bid to become a hub for international commercial arbitration
As one of the world’s fastest-growing economies, India is a party to many international commercial arbitrations and the government is making efforts ...
Brands – Role and liability of celebrity endorsers
The marketing and advertising industry has grown as an organised industry using innovative ideas that are designed to ...
Related Articles
Clasis Law Newsletter
The latest legal news from India, including recent court judgments, changes to corporate/commercial law and updates on projects and IP.
Global Developments on Best Execution
Currently a hot topic for global regulators, firms are recommended to review their global best execution compliance practices ...
Initial Coin Offerings: Another brainteaser in the virtual currency bandwagon
The position of virtual currencies and ICOs in India remains murky.
Related Articles by Jurisdiction
India: Institutional Arbitration – Need of the Hour
The need to promote and encourage institutional arbitration for commercial disputes in India ...
Anti-Trust & Competition
Our Anti-trust Report features contributions from Yulchon on 'Korea’s aggressive antitrust enforcement in financial product markets, and from Phoenix Legal on 'CCI's recent decision in the Indian automobile sector: fostering a ...
Latest Articles
Clasis Law Newsletter
The latest legal news from India, including recent court judgments, changes to corporate/commercial law and updates on projects and IP.
Bank Indonesia issues new e-money regulation
The use of e-money has increased along with a growing number of e-money providers in Indonesia ...
Off-plan sales in Dubai: Risks and rewards
Whether buyers are looking to expand their real estate portfolio or buyers are simply looking to find their ideal home, great deals can be found in Dubai’s off-plan real estate sector ...