emfizz.com March 24, 2017

Idea-Vodafone India merger to create India's largest telco

20 March 2017, 10:57 | Patty Hardy

Idea-Vodafone India merger to create India's largest telco

In the beginning Vodafone will be a dominant partner in the merged entity with 45.1% stake after it will transfer a stake of 4.9% to the Aditya Birla group for Rs3,874 crore in cash to complete the merger

The board of directors of Idea Cellular at its meeting held today approved the "scheme of amalgamation of Vodafone India Limited (VIL) and its wholly owned subsidiary Vodafone Mobile Services Limited (VMSL) with the company", Idea said in a regulatory filing.

The companies said, the merger will create India's largest telecom operator with the widest network.

The merger makes possible synergies of United States dollars 10 billion, said Vodafone CEO Vittorio Colao.

The merger attempts to contest a brutal price war sparked by new rival, Mukesh Ambani's Jio.

Vodafone and Idea began talks for a possible merger in late January this year.

Bharti Airtel reported its lowest profit in four years in the October-December quarter while No. 3 player Idea Cellular posted its first-ever quarterly loss for the same period. The CEO and COO of the entity will require the compliance of both companies.

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According to an earlier report by brokerage firm Credit Lyonnais Securities Asia (CLSA), the merged entity will have revenues of over Rs 80,000 crore.

On the meanwhile, the consolidation process may also result in job losses as companies cut costs. Vodafone will also explore strategic options for its 42% stake in Indus Towers; potential options include either a partial or a full disposal.

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.

The combined company would clearly have a dominating presence in the Indian telecom market with 35% customer market share and 41% revenue market share. It will be capable of building substantial mobile data capacity, utilising the largest broadband spectrum portfolio with 34 3G carriers and 129 4G carriers across the country, said Vodafone Plc, the British Parent of Vodafone India.

The Birlas have ruled out major downsizing at Idea after the merger. The combination will drive in huge synergies for the two companies.

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.

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