Birth of a giant: Voda, Idea merge in all-share deal
British telecom major Vodafone and Aditya Birla group-run Idea Cellular today announced the merger of their Indian operations, creating the largest mobile operator by customer and revenue market share.business Updated: Mar 20, 2017 14:36 IST
British telecom major Vodafone and Aditya Birla group-run Idea Cellular today announced the merger of their Indian operations, creating the largest mobile operator by customer and revenue market share.
The merged entity, which will come into force over the next two years, will be headed by Kumar Mangalam Birla as Chairman.
Vodafone will have its nominee as the chief financial officer, its CEO Vittorio Colao said here at a press meet, which was also attended by Birla.
The all-share merger for both partners excludes Vodafone’s 42% stake in Indus Towers and will be effected through issuing new shares in Idea to Vodafone and result in Vodafone deconsolidating Vodafone India.
Vodafone will own 45.1% in the new company after transferring 4.9 per cent to the Aditya Birla group for Rs 3,874 crore in cash concurrent with completion of the merger.
Idea will hold 26% of the combined entity while the rest will be owned by public shareholders.
Idea and Vodafone said the merged entity will be jointly controlled by Vodafone and the Aditya Birla group as per shareholders’ agreement.
With 204.68 million customers, Vodafone enjoys market share of 18.16%. Idea has 16.9% with 190.51 million customers as of December 2016, according to Trai data.
Airtel, with a market share of 23.58% and a customer base of 265.85 million, leads the market both in terms of revenue and customer base.
According to CLSA report in January, the merged entity will have revenue of over Rs 80,000 crore, translating into a 43% share by revenue and 40% by active subscriber base with around 400 million customers.
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.
“The merger pegs implied enterprise valuation of Rs 82,800 crore ($12.4 billion) for Vodafone India and Rs 72,200 crore ($10.8 billion) for Idea,” according to an exchange filing by Idea.
The companies had a net debt of Rs 1.07 trillion as of December 2016.
The Vodafone chief, who ruled out any chance of the lingering tax dispute with the government to affect the merger process, also said both the companies will have three representatives each on the board of the new company.
Colao also said the merger makes possible synergies of $10 billion.
He also added that both the brands, considering their strengths, will continue to operate separately.
Indicating Vodafone’s intention of gradually exiting the country, Colao and Birla said over a period, both companies will have equal stakes in the merged entity.