emfizz.com March 24, 2017

Idea, Vodafone announce merger; combined entity to be India's biggest telecom operator

20 March 2017, 07:02 | Patty Hardy

Idea Cellular to merge Vodafone India, create India's largest telecom firm with Rs 80000 cr revenue

Idea-Vodafone announce merger combined entity to be biggest teleco in India

The U.K.'s Vodafone and Aditya Birla group firm Idea Cellular on Monday announced that they have kickstarted a mega merger deal.

This will bring about the much-needed consolidation in the telecom industry, analysts said.

Vodafone will hold 45.1 percent of the merged entity, while Idea's promoters will hold 26 percent, according to a filing to the stock exchanges. The remaining stake will remain with the public.

Vodafone, the world's second-largest cellphone operator, has endured a tumultuous ride since it entered India in 2007, with fierce competition and a high-profile tax battle making a business contributing more than 10 percent of its revenues and profits its most unpredictable by far.

Soni believes the combined Ebitda margin could improve by 250 to 300 basis points as the two companies would save some expenses on the network.

Vodafone has 202.79 million users and Idea Cellular 187.68 million in India.

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With 32.84 per cent, Bharti Airtel has the maximum market share, but the combined entity of Vodafone India and Idea will command 43 per cent, say analysts. "Immediately there after on the amalgamation of VIL with the company, the shares issued to VIL pursuant to the amalgamation of VMSL with the company shall stand cancelled and, post such cancellation, the company shall issue an aggregate number of equity shares of the company equal to 50% of the post issue paid up capital of the company to the shareholder of Vodafone".

Idea will have the sole right to appoint the chairman.

Idea Cellular is already listed on BSE and NSE, while Vodafone India is expected to list on bourses in March 2017 and raise about $2-$3 billion.

Promoters of Idea and Vodafone will have the right to nominate three directors each, while Idea Cellular will have the right to appoint the chairman. Until equalisation is achieved, voting rights of additional shares held by Vodafone will be restricted and votes will be exercised jointly.

Prior to completion of the transaction, Vodafone and Idea intend to sell their standalone tower assets and Idea's 11.15% stake in Indus Towers to reduce leverage in the combined company.

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