Vodafone joins with rival in bid to put down Indian mutiny

The British-based giant said it has struck an agreement with Idea’s owner, the Indian conglomerate Aditya Birla Group, which will see it hold a 45% stake in the new entity.

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.

According to a GSMA report, consolidation in India’s telecom sector, which employs 2.2 million people directly and 1.8 million indirectly, may lead to shedding off almost a third of these jobs on the back of duplication of resources across the country.

At the time of the merger, Idea’s Enterprise value was pegged at Rs 72,200 crore while Vodafone India was valued at Rs 82,800 crore.

Idea Cellular is owned by India’s Aditya Birla Group. “We look forward to working with the Aditya Birla Group to create value for all stakeholders”, said Vodafone Chief Executive Vittorio Colao in a statement.

Further, the debt levels of the merged telecom firm will be high at around Rs 1,08,000 crore, he said, adding that the entities will have to inorganically deleverage to rein in the debt.

Before the merger, Vodafone India was #2 biggest Indian telco, and Idea was #3 biggest player.

The two parties believe that the merger will enhance pan India 3G/4G footprint, thereby accelerating the Narendra Modi-Government’s “Digital India” initiative.

You can check out the video giving more details on Vodafone-Idea Cellular Merger.

“If Vodafone and the promoters of Idea do not have equal shareholding by the expiry of the fourth year from the completion of amalgamation, Vodafone is obliged to reduce its holding in order to equalize its ownership with that of the promoters of Idea over the following five years”, said Idea.

Amid wide expectations that the Vodafone-Idea merger could face a number of regulatory hurdles in terms of hitting the revenue and subscriber market share and spectrum caps in various circles, Mathews said, “no one’s interest will be served by spectrum lying idle”. In terms of subscribers’ count, it would command 35% market share.

Clearing his stand on mergers and acqusitions in the telecom sector, GSM group Cellular Operators Association of India (COAI) has said that the poor financial health of the sector is leading to mergers and acquisitions in the sector.

As announced previously, the deal does not include Vodafone’s 42 percent stake in Indus Towers.

Idea will appoint the chairman and the CEO and COO will be appointed by both the shareholders.