Vodafone to merge with Idea Cellular after Jio threat, form India’s largest telecom operation
Britain’s Vodafone Group will merge its Indian subsidiary with local rival Idea Cellular within two years, Idea said on Monday.business Updated: Mar 20, 2017 10:54 IST
Britain’s Vodafone Group will merge its Indian subsidiary with local rival Idea Cellular within two years, Idea said on Monday, creating a new market leader better able to contest a brutal new price war.
Vodafone will own 45.1% of the merged entity, after it transfers about 4.9% to promoters of Idea and/or their affiliates for Rs 38.74 billion ($592.15 million) in cash, Idea said, announcing one of the biggest merger in the telecom space.
The combined Vodafone-Idea group would India’s largest telecom operation with almost 400 million customers, or 35% market share.
The board of directors of Idea Cellular at a meeting approved the “scheme of amalgamation of Vodafone India Limited (VIL) and its wholly owned subsidiary Vodafone Mobile Services Limited (VMSL) with the company”, Idea said in a regulatory filing.
The transaction is subject to necessary approvals from concerned authorities, including SEBI, department of telecom and RBI etc.
“Upon the amalgamation becoming effective, the entire business of VIL and VMSL, excluding VIL’s investment in Indus Towers Limited, its international network assets and information technology platforms, will vest in the company,” the filing said.
The merger comes after India’s mobile industry was thrown into turmoil with the launch last year of Reliance Jio Infocomm, the new 4G mobile broadband network built at a cost of more than $20 billion by India’s richest businessman, Mukesh Ambani, as part of his Reliance Industries conglomerate.
Jio has made an impact with free voice calls and cut-price data services, forcing India’s three biggest operators - Bharti Airtel, Vodafone and Idea - to slash prices and accept lower profits.
Idea said the companies expected cost and capex synergies of about $10 billion in net present value after integration costs and spectrum payments.
Idea will have the sole right to appoint the chairman, while Vodafone will appoint the chief financial officer, it said.
The appointment of a chief executive officer and a chief operating officer would require the approval of both companies, which would get the right to nominate three board members each.
Vodafone, the world’s second-largest cellphone operator, has endured a tumultuous ride since it entered India in 2007, with fierce competition and a high-profile tax battle making a business contributing more
than 10% of its revenues and profits its most unpredictable by far.