Vodafone Merges With Idea, Owns Lion's Share

In early hours, the shares of Idea slipped 6.75% on BSE.

Vodafone and Idea are a good match, said Shiv Putcha, a Mumbai-based analyst with research firm IDC, because they own the rights to cellular airwaves in different parts of the country and don't overlap much in the regions and customers they serve. Ideas turnover is Rs 36,000 crore.

Telecom firms in India are trying to consolidate after Reliance Jio Infocomm Ltd., backed by India's richest man Mukesh Ambani, introduced free services in September previous year. The new entity will become the leading communications provider in India with nearly 40 crore customers, 35 per cent customer market share and 41per cent revenue market share, the statement added.

Axiata Group Bhd said it is analysing all potential impact from the proposed merger between its 19.8%-owned Idea Cellular Ltd and Vodafone India, a unit of Britain's Vodafone Group Plc. Instead, it will use the cash to reduce the group's debt facilities, which have swelled to €41bn.

Vodafone announced this morning that it will combine its subsidiary Vodafone India with Idea in a deal valued at $23 billion, creating the largest telco in the country by revenue and subscriber numbers.

With 204.68 million customers, Vodafone enjoys market share of 18.16 per cent. Idea has 16.9 per cent with 190.51 million users as of December 2016, according to Trai data. It said that the brand strategy for the new firm "will be developed in due course" and "will leverage customers' affinity for both existing brands, built up over the past decade". It would hold 1,850 MHz, including circa 1,645 MHz of liberalised spectrum acquired through auctions 7.

Shares in Idea initially soared following the announcement but then tanked to close down more than 9%, with reports saying investors were anxious the deal undervalued Idea.

The statement also stated that the promoters of Idea have the right to acquire up to 9.5% additional stake from Vodafone to equalise shareholding over time.

The companies hope to gain run-rate cost and capex synergies worth 140 billion rupees annually by the fourth full year after the merger is completed in 2018.

The Idea-Vodafone merger will create a strong player, but multiple challenges from the deal, including breach of spectrum holding and revenue marketshare cap, will have to be resolved in a fixed timeframe, ICRA said on Monday. It will have over Rs 80,000 crore in revenue.

Birla will be the chairman of the combined entity in accordance with the AB Group's right to appoint the chairman as one of its three directors. The appointment of Chief Executive Officer and Chief Operation Officer will be jointly decided by both parties. Vittorio Colao, chief executive of Vodafone, the world's second-biggest mobile operator by subscribers, has called Mr. Ambani's promotion "unprecedented" and hard to plan against.

  • Arturo Norris