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Vodafone to create biggest operator in India with Idea merger

21 March, 2017, 10:07 | Author: Nadine Todd
  • Idea Vodafone announce merger combined entity to be India's biggest telecom operator

The combined revenues of the merged entity will be Rs 81,403 crore, making it the single largest in the country. He could launch new offers too.

The merger was announced this morning, two months after talks between the UK-based operator and Idea owner Aditya Birla Group (ABG) were announced.

The combined venture will account for over 25% of the allocated spectrum and will have to sell about 1% (worth Rs 5,400 crore) to comply with spectrum cap norms.

Vodafone will transfer a stake of around 4.9% of the company for around 39 billion rupees ($579 million) as part of this transaction, and there will be a mechanism in place created to equalise the shareholdings within four to nine years.

"India was earlier the jewel in our crown". Vodafone India said its merger with Idea will net it significant savings as both operators pool infrastructure and associated costs. The matter is now under arbitration overseas under worldwide laws.

Vodafone and Idea rank second and third in India with around 200 million and 177 million customers.

Vodafone will initially own 45% of Idea after the merger. Yet Idea's share price is up 26 rupees since January 18, when rumours of a union first started to swirl.

The AB group will have the right to buy 9.5 per cent in the entity at Rs 130 per share. He was confident that like other Birla group mergers and acquisitions, investors would gain in the long run.

Soon after the announcement of merger, shares in Idea rose as much as 14.25 per cent. It will help bring in operational efficiencies and improved quality of services for customers.

Vodafone India has confirmed that it has reached an agreement to acquire rival Idea Cellular. This valuation excludes Vodafone's 42% stake in Indus Towers and Idea's holding in the tower company of 11.15%. Mr. Colao said he didn't expect major regulatory hurdles to the deal.

Birla is slated to be the chairman of the new entity.

In total, there will be 12 directors including three appointed by each of Vodafone and the Aditya Birla Group, and six independent directors. Vodafone retains the right to appoint a CFO where as both the entities will choose a CEO as well as the COO.

"It is good from the industry's and consumers' perspective as it will mean state-of-the-art services and network, both of which need substantial investment, which is not possible with a financially weak entity", he said, adding that the move will allow consumers to be "ultimate beneficiaries". The companies think they can save US$2.1bn per year by 2022, four years after completion. The next few months shall throw light in the numbers that Jio has successfully been able to retain from the 10 crore subscribers it acquired during the free promotional period.

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