After eight months of hectic parleys, Britain's Vodafone
Group's Indian subsidiary and Aditya Birla Group's Idea
Cellular have taken a step closer to a mega merger
that would create a new market leader better able to contest a brutal price war with 42 per cent market share.
Cellular on Monday approved the merger
Mobile Services Limited.
In a BSE filing, Idea
Celluar announced its approval of amalgamation of Vodafone
India Ltd (VIL) and its wholly owned subsidiary Vodafone
Mobile Services Limited (VMSL) with the company subject to receipt of necessary approvals of shareholders, creditors, SEBI, RBI and other governmental authorities.
Cellular gained nearly 15% in first 5 minutes of the trade but later pared some gains to trade 6% higher after media reports that the company has approved merger
India. According to reports, Idea
Cellular will hold 25% stake in the merged company.
According to the release, the Idea
Board believes the proposed amalgamation will result in:
a. Creation of largest Indian telecom operator with widest mobile network in the country and pan India 3G/4G footprint
b. Sufficient spectrum to complete with major operators in the market while offering innovative priced mobile services to customers;
c. Acceleration of expansion of wireless broadband networks
will hold 45.1 per cent stake and will transfer 4.9 per cent stake to Idea
founders. The merger
plan with Vodafone
will require regulatory approval.
Vodafone, the world's second-largest cellphone networks operator, has agreed to Birla's demand that Kumar Mangalam Birla would become the chairman of the merged entity. The equity value of both the companies
has been estimated at Rs 40,000 crore each while the combined entity would have debt of approximately Rs 89,000 crore.
was necessitated by the launch of Mukesh Ambani-owned Reliance Jio Infocomm that has shaken the Indian wireless telephony market with its low rates.
Jio has made an immediate impact with the launch of free calls and cut-price data, forcing the three biggest operators — Bharti Airtel, Vodafone
— to slash prices and accept lower profits.
Since its launch in October last year, Jio had garnered 100 million customers, whereas Vodafone
would have around 375 million customers.
would be a win-win deal for both companies.
will deconsolidate its massive India debt from its British parent, Idea
Cellular would be able to invest in its operations without taking much help from its parent group. Vodafone
will also get a listing in India as Idea
is already listed in India.