It’s finally happening, India’s second largest telecom operator Vodafone India will merge with India’s third largest telecom operator Idea Cellular. The new entity will now displace Airtel from its first spot to become the largest telecom operator in India. It will have a combined mobile subscriber base of around 400 million.
“have approved the scheme of amalgamation of Vodafone India Limited and its wholly owned subsidiary Vodafone Mobile Service Limited with the company (Idea),” said Idea Cellular in a regulatory filing.
After the merger, Vodafone India will own 45.1 percent of the new combined telecom operator. Whereas Idea Cellular will own 26 percent of the new combined company. Idea Cellular will have rights to further acquire more shares from Vodafone under an agreed mechanism with a view to equalising the shareholdings over time.
“For Idea shareholders and lenders who have supported us thus far, this transaction is highly accretive, and Idea and Vodafone will together create a very valuable company given our complementary strength,” said Kumar Mangalam Birla, Chairman, Aditya Birla Group.
“The combination of Vodafone India and Idea will create a new champion of Digital India founded with a long-term commitment and vision to bring world-class 4G networks to villages, towns and cities across India,” said Vittorio Colao, Chief Executive, Vodafone Group Plc.
Vodafone – Idea Merger highlights
- Vodafone India will own 45.1 percent of the new company.
- Idea Cellular will own 45.126 percent of the new company. It will also have rights to further acquire more shares from Vodafone.
- The combined telecom operator will become India’s largest telecom operator.
- Combined subscriber base of around 400 million, 35 percent customer market share and 41 percent revenue market share.
- Vodafone and Idea anticipate that merger to complete by the beginning of 2018 calendar year.
According to the latest telecom subscription data from TRAI, Vodafone India has got a market share of 18.16 percent. That’s around 200 million mobile subscriber base. On the other hand, Idea Cellular owns around 185 million subscribers with a market share of Rs 16.9 percent. This two operators when merged would become the largest telecom operator in India with a combined subscriber base of around 400 million. That’s 100 million more than the closest rival Bharti Airtel who has a subscriber base of 262 million subscribers.
The combined company will be jointly controlled by Vodafone and the Aditya Birla Group, Vodafone will deconsolidate Vodafone India immediately. Post-closing, the combined company will be reported as a joint venture by Vodafone and accounted for under the equity method, resulting in a decrease of Vodafone’s net debt. The Board of the combined entity will be comprised of 12 directors including three directors appointed by each of Vodafone and the Aditya Birla Group, and six independent directors.
- Mr Kumar Mangalam Birla will be the Chairman of the new company.
- Chief Financial Officer will be appointed by Vodafone.
The combined company would hold 1,850 MHz, including circa 1,645 MHz of liberalised spectrum acquired through auctions. It will utilise the largest broadband spectrum portfolio with 34 3G carriers and 129 4G carriers across the country.
Prior to completion of the transaction, Vodafone and Idea intend to sell their standalone tower assets and Idea’s 11.15 percent stake in Indus Towers to reduce leverage in the combined company. Vodafone will also explore strategic options for its 42 percent stake in Indus Towers, potential options include either a partial or a full disposal.