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giftedviz.com March 23, 2017


Vodafone-Idea announce merger to create India's biggest telecom company

21 March 2017, 12:03 | Austin Hogan

Idea board approves merger with Vodafone India

Idea Cellular Vodafone to merge create India's largest telco

Vodafone and Idea Cellular will merge to create India's biggest telecom company, ahead of Bharti Airtel, and the joint venture comes at a time when Mukesh Ambani's Reliance Jio has unleashed a wave of fierce competition in the mobile market.

Aditya Birla Group, the majority owner of Idea, will own 26 percent while other shareholders will own the remaining 28.9 percent. According to the merger agreement, Idea would have the right to name the chairman whereas Vodafone has been accorded with the right to name the CFO.

The company said that it will issue an aggregate number of equity shares of the new company to Vodafone India Ltd equal to 47% of the post issue paid-up capital. 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.

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.

Following the transaction, Vodafone will take control of 45.1 percent of the combined company, after selling a 4.9 percent stake in the new entity to billionaire Kumar Mangalam Birla's holding companies.

VIL and VMSL holds a turnover of Rs 5,025 crore and Rs 40,378 crore with a net size worth Rs 12,855 crore and Rs 3,737 crore respectively. Idea's turnover is Rs 36,000 crore.

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The company said that the amalgamation will result in creation of India's largest telecom company with widest mobile network in the country with pan 3G/4G footprint.

"The name of the combined listed company will be changed in due course", the statement added. Its shares were trading up 0.06 per cent at Rs 347 per scrip at the BSE, while Reliance Communications was down by 0.39 per cent at Rs 38.10 per share.

The merger will result in substantial cost and capex synergies with an estimated net present value of around Dollars 10 billion after integration costs and spectrum liberalisation payments, with estimated savings of USD 2.1 billion annually from the fourth year of the merger.

As per the merger and acquisition rules, an entity should not hold over 25 per cent spectrum allocated in a telecom circle and 50 per cent of spectrum allocated in a particular band in a service area.

The new puffed-up wireless operator would boast 395 million subscribers, over and above those of market leader Bharti Airtel Ltd.



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