Vodafone, Idea Cellular to merge, set to become India’s largest telecom operator

Vodafone, Idea Cellular to merge, set to become India’s largest telecom operator

The Idea-Vodafone merger could see $10billion in cost, capex synergies (WION)

New Delhi, Delhi, India | Mar 20, 2017, 12.56 PM (IST)

Britain's Vodafone Group will merge its Indian subsidiary with local rival Idea Cellular within two years,  Idea said today. The new entity will compete with Reliance Jio that has unleashed a fierce price war.

Kumar Mangalam Birla will be the chairman of the merged entity. 

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According to some reports, Idea said Vodafone will own 45.1 per cent of the merged entity, after it transfers about 4.9 per cent to promoters of Idea and/or their affiliates for 38.74 billion rupees ($592.15 million) in cash. PTI, however, says both companies will have an equal stake. 

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The merger will see $10 billion in cost, capex synergies, reports said.

"Vodafone Group Plc and Idea Cellular announced that they have reached an agreement to combine their operations in India," they said in a statement to the Bombay Stock Exchange (BSE).

"The combined company would become the leading communications provider in India with almost 400 million customers, 35 per cent customer market share and 41 per cent revenue market share," the statement added.

The confirmation ended months of speculation that the two operators were ready to sign a deal to help fend off Reliance Jio, whose recent arrival has shaken up India's ultra-competitive mobile network market.

Shares in Idea rose as much as 14.25 per cent immediately after the merger news but gave up gains to be trading up 3.8 per cent.

The merger of Vodafone - the world's second-largest cellphone network operator - with the Aditya Birla Group firm - India's third-largest cellular operator - would create a company with around 387 million users and form one of the largest telecom companies in the world.

Since its entry in India in 2007, Vodafone has become the number-2 operator in the country, but its journey has been tumultuous as it is locked in a legal battle with the government over a $2 billion retrospective tax claim over its acquisition of Vodafone India from Hutchison in 2007.

It had written down value of business by 5 billion pound ($3.35 billion) late last year. The British firm has pumped in more than $7 billion into the India unit.

Backed by India's richest man Mukesh Ambani, Reliance Jio Infocomm is offering free voice calls and data till March and has notched up 74 million users. It has already invested over $25 billion and is investing another Rs 30,000 crore ($4.8 billion).

In what could be the biggest telecom operator merger in India, Idea Cellular has approved its amalgamation with Vodafone India. (WION)

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(WION)

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