Vodafone India-Idea Cellular merger to create the largest telecom operator in India

We have been hearing about the merger of Vodafone India and Idea Cellular since January this month. While the reports were refuted initially, Vodafone group later confirmed that it was thinking of merging the Indian arm with Idea Cellular. Well, fast forward to today, the merger has been confirmed by both these telecom operators, and after their merger is complete, we will have the largest telecom operator in India.

Vodafone India and Idea Cellular have announced that both these telecom operators will be merging their entities to create the largest telecom operator in India. This will not just be in terms of subscribers, but revenue as well. There has been a price war going in India’s telecom sector since last year due to Reliance Jio’s free plans which made other telecom operators cut down the prices of their data and voice plans. One of the reasons for this Vodafone-Idea merger is also to tackle Reliance Jio’s increasing threat. However, after the merger is complete, the price war is only to going to intensify.

Also, post merger, Vodafone will deconsolidate Vodafone India and the merger will be reported as a joint venture. In this partnership, Vodafone will have a share of 45.1% whereas the Aditya Birla Group (which owns Idea Cellular) will have a stake of 26% with the remaining 28.9% share retained by Idea’s other shareholders. Also, this merger of Vodafone India with Idea Cellular excludes Vodafone’s stake of 42% in Indus Towers. Apart from that, the Aditya Birla Group can further acquire up to 9.5% additional share from Vodafone in order to equalise the shareholding.

After the completion of the merger, Mr. Kumar Mangalam Birla will be the Chairman of this joint venture whereas Vodafone will have the right to appoint the venture’s CEO and CFO from within Vodafone. This merger is expected to be completed during the calendar year of 2018. Post merger, this combined company will become the largest telecom operator in India with almost 400 Million customers which amount to 35% market share along with 41% market share in terms of revenue.

In terms of network and spectrum, the combined company would hold the 1850 MHz spectrum including the circa 1645 MHz spectrum. This merger would also benefit from Vodafone’s strong presence in metro circles which will backed by Idea’s reach in semi-urban and rural areas.

“Throughout its history, the Aditya Birla Group has been synonymous with the task of nation building and driving inclusive growth in the country. This landmark combination will enable the Aditya Birla Group to create a high quality digital infrastructure that will transition the Indian population towards a digital lifestyle and make the Government’s Digital India vision a reality. For Idea shareholders and lenders who have supported us thus far, this transaction is highly accretive, and Idea and Vodafone will together create a very valuable company given our complementary strengths.” said Mr. Kumar Mangalam Birla, Chairman of Aditya Birla Group.

“The combination of Vodafone India and Idea will create a new champion of Digital India founded with a long-term commitment and vision to bring world-class 4G networks to villages, towns and cities across India. The combined company will have the scale required to ensure sustainable consumer choice in a competitive market and to expand new technologies – such as mobile money services – that have the potential to transform daily life for every Indian. We look forward to working with the Aditya Birla Group to create value for all stakeholders.” said Vittorio Colao, CEO of Vodafone Group.

Well, after the merger of Vodafone India and Idea Cellular is complete, we expect the telecom sector in India to become more interesting and competitive. Maybe other telecom operators too might think of mergers to take on this joint venture of Vodafone India and Idea Cellular.

Key Highlights of Vodafone India – Idea Cellular merger:

• Vodafone Group to merge its subisidiary Vodafone India with Idea Cellular while exlcuding its 42% stake in Indus Towers.
• In this joint venture, Vodafone will have a share of 45.1% whereas Aditya Birla Group (which owns Idea Cellular) will have a stake of 26% with the remaining 28.9% share retained by Idea’s other shareholders.
• Until equalisation is achieved, the voting rights of the additional shares held by Vodafone will be restricted and votes will be exercised jointly under the terms of the shareholders’ agreement.
• This combined company will become the largest telecom operator in India with almost 400 Million customers which amount to 35% market share along with 41% market share in terms of revenue.
• Sustained investment by the combined entity will accelerate the pan-India expansion of wireless broadband services using 4G/4G+/5G technologies, support the introduction of digital content and ‘Internet of Things’ (IoT) services as well as expand financial inclusion through mobile money services for the benefit of Indian consumers, businesses and society as a whole.
• Idea Cellular will contribute all of its assets including its standalone towers with 15.4k tenancies and its 11.15% stake in Indus Towers whereas Vodafone Group will contribute Vodafone India including its standalone towers with 15.8k tenancies but excluding its 42% stake in Indus Towers.