CHENNAI: The Idea Cellular board on Monday announced that it had approved the proposal of merging Vodafone India, and wholly owned subsidiary Vodafone Mobile Services Ltd., with Idea.
Long expected, the merger will create the single largest telecom firm in the country, both in terms of revenues and subscribers, with analysts saying that it could well take on deep-pocketed Reliance Jio in the ongoing war for the Indian mobile data market.
According to the statement from Idea, Vodafone will hold a 45.1 per cent in the newly merged entity, Idea's promoters will hold 26 per cent and the Aditya Birla Group will have the right to buy 9.5 per cent of the stake at Rs. 130 per share.
"Vodafone will own 45.1 percent of the combined company after transferring 4.9 percent to Idea's promoters or its affiliates for Rs 38.74 lakh crore in cash concurrent... Idea promoters will hold 26.1 percent of the company and the balance will be held by public," according to the BSE filing.
According to the statement, the combined revenues of the merged entity will be Rs. 81,403 crore, making it the single largest in the country. Reports peg the firm's market share at 40 per cent in terms of active subscriber base, it will account for over 25 per cent of allocated spectrum and will need to sell off about 1 per cent to stay compliant with current spectrum norms.
Idea said the companies expected cost and capex synergies of about $10 billion in net present value after integration costs and spectrum payments.
Idea will have the sole right to appoint the chairman, while Vodafone will appoint the chief financial officer, it said.
The appointment of a chief executive officer and a chief operating officer would require the approval of both companies, which would get the right to nominate three board members each.
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.
Shares in Idea rose as much as 14.25 percent immediately after the merger news but gave up gains to be trading up 3.2 percent at 0432 GMT.
The merger, while subject to several regulatory approvals, comes at a time when the telecom sector is going through intense competition, with Mukesh Ambani-led Reliance Jio throwing down the gauntlet to established operators. The entry of the Vodafone-Idea behemoth, is only set to ramp up the competition and speed up consolidation.
(With inputs from Reuters)