Vodafone-Idea Cellular merger to create India's largest telco (Intro-Round Up)

MUMBAI Britain's Vodafone Group (VOD.L) and Idea Cellular (IDEA.NS) agreed on Monday to merge their Indian operations to create the country's biggest telecoms business in a bid to contest a brutal price war sparked by new rival Reliance.

Vodafone India's "merger of equals" with Idea will create the largest mobile operator in India, with around 400 million customers, overtaking Airtel, and making it four times the size of Jio. In India, rising costs and fierce competition have weighed on the finances of industry.

Bharti, Vodafone India and Idea have all had to cut rates and offer more attractive data plans to compete with Reliance Jio, which started off by charging no tariff on data and subsequently expecting customers to choose from a range of plans, starting April.

Kumar Mangalam Birla, Chairman of the Aditya Birla Group, will be its Chairman.

Vodafone will hold 45.1 percent of the merged entity after it transfers a 4.9 percent stake to Idea backers for 39 billion rupees ($579 million) in cash.

Once the merger is complete, the entire business of Vodafone India and Vodaone Mobile Services - excluding Indus Towers' investment, worldwide assets and IT platforms - will vest in the company.

Idea Cellular in a regulatory filing said its Board of Directors "has approved the scheme of amalgamation of Vodafone India Ltd and its wholly owned subsidiary Vodafone Mobile Service Ltd with the company (Idea)".

Idea said the companies expected cost and capex synergies of about $10 billion in net present value after integration costs and spectrum payments.

Idea said that the promoters will hold 26% of the new merged entity with the rest holding with the public. 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. "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 strengths".

The consolidation will give rise to the largest telecom company in the country with over one-third share in the total subscriber base and 41% share in the sector's revenue. But Vodafone and Idea said they will look to reduce their tower assets exposure, including selling their stakes in the joint venture. Cellular body COAI also termed the merger of Idea Cellular and Vodafone India as a "bold" move and said the combined stronger entity will be beneficial to both government and consumers of the Indian telecom market.

Last month, Bharti Airtel had announced the acquisition of Telenor's India operations in seven telecom circles for an undisclosed amount.

  • Leroy Wright