Idea Celluar’s board has approved a merger with Vodafone India, making it the biggest telecom entity in the country. The merger is expected to be completed in 2018. According to a statement released, promoters of Idea and Vodafone will have the right to nominate three directors each.
Idea will have its nominee as chairman while CFO will be from Vodafone’s nominee. Both CEO and COO will be a joint decision taken by both parties. Vodafone will hold 45 percent in the combined entity. Idea promoters will hold a 26 percent in the combined entity. AB Group will have the right to buy 9.5 per cent stake in the entity at Rs 130 per share.
Under the terms of the agreement, the merger should be completed within 24 months. ‘Upon the amalgamation of becoming effective, the entire business of VIL and VMSL will vest in the company,’ Idea Cellular said in a statement. ‘Vodafone will own 45.1 percent of the combined company after transferring 4.9 percent to Idea’s promoters or its affiliates for Rs 38.74 lakh crore in cash concurrent. Idea promoters will hold 26.1 percent of the company and the balance will be held by the public,’ according to the filing.
The board of Idea Cellular with Vodafone India and its subsidiaries will create an entity with a revenue of around Rs 77,500-80,000 crore. The merger of the second largest telecom player in the country with the third-largest will create the largest telecom firm in the country. The combined entity of Aditya Birla group’s Idea Cellular and Vodafone India will have the widest network in the country and pan-India 3G/4G footprint, the companies said in a statement. Analysts say that the new combined entity of Vodafone India and Idea Cellular will be in a better position to compete with Reliance Jio and Bharti Airtel.
‘The landmark combination will enable the Aditya Birla Group to create a high-quality digital infrastructure that will transition the Indian population towards a digital lifestyle and make the government’s Digital India vision a reality,’ said Aditya Birla Group, chairman, Kumar Mangalam Birla.
According to a report, the merged entity give a 43 per cent market share by revenues and a 40 percent market share by active subscriber base. The behemoth will account for over 25 percent of allocated spectrum and will have to sell about one per cent to comply with spectrum cap norms. It will be an all-share merger of Vodafone India (excluding Vodafone’s 42 per cent stake in Indus Towers) and Idea. The merger will be effected through the issue of new shares in Idea to Vodafone and would result in Vodafone de-consolidating Vodafone India.
The merger will further intensify competition in the country’s highly-contested telecom space where players are gunning for both revenue and subscriber additions. The combined entity will take on the likes of market leader Bharti Airtel and Reliance Jio. The latest entrant in the telecom sector, Reliance Jio, is fast acquiring subscribers on the back of free voice and data services under its Happy New Year Offer and Jio Prime subscription.