Idea Cellular and the Indian unit of British telecom company Vodafone today announced a merger, creating India's largest telecom operator. The merger will create India's largest telecom operator with around 40 crore customers or nearly one in every three customers in the country.
The combined entity of Aditya Birla group's Idea Cellular and Vodafone India will have the widest network in the country and pan-India 3G/4G footprint, the companies said in a statement. The entry of Reliance Jio has spurred a consolidation in the Indian telecom sector. Analysts say that the new combined entity of Vodafone India and Idea Cellular will be in a better position to compete with Reliance Jio and Bharti Airtel.
"The 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," said Aditya Birla Group chairman Kumar Mangalam Birla. Vodafone and Idea anticipate the merger to complete next year.
Here are 10 things to know about the Idea Cellular, Vodafone India merger:
1) 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 Rs. 3,874 crore in cash, Idea said.
2) The Aditya Birla group will own 26 per cent of the entity and will have the right to acquire more shares from Vodafone under a mechanism with a view to equalising shareholdings over time.
3) The deal excludes Vodafone's 42 per cent stake in telecom tower company Indus Towers.
4) Promoters of Idea will have the sole right to appoint chairman of the merged entity.
5) The entry Reliance Jio has spurred a consolidation in the Indian telecom sector. Jio, backed by energy conglomerate Reliance Industries' billionaire owner Mukesh Ambani, has intensified competition in India, the world's second-biggest mobile market after China.
6)Bharti Airtel reported its lowest profit in four years in the October-December quarter while Idea Cellular posted its first-ever quarterly loss for the same period.
7) Bharti Airtel had earlier this year announced an agreement to buy Norwegian company Telenor's operations in six Indian states.
8) Reliance Communications has already entered into an agreement to merge its wireless business with rival Aircel.
9) The merger between Vodafone and Idea Cellular is seen positive for the telecom sector and the combined entity. "The combined entity's operating margins will improve by around 3 percentage points due to cost synergies in networking and selling, general and administrative expenses," India Ratings, a rating agency, had said in a report.
10)Shares in Idea rose as much as 14.25 per cent immediately after the merger news but later gave up some gains.