This means the combined entity of Vodafone and Idea Cellular, which are India's number 2 and 3 mobile players, respectively, will overtake Bharti Airtel in a bid to tackle a raging price war in the world's second-largest market.
The British firm will own 45.1 per cent of the merged entity while the Aditya Birla group, Idea's parent company, will own 26 per cent after paying Rs 3,874 crore cash for a 4.9 per cent stake, the two firms announced at a press conference here.
The remaining 28.9 per cent will be held by other shareholders.
The new company, which will come into being over the next two years, will be headed by Kumar Mangalam Birla while Vodafone will have the right to appoint chief financial officer.
The CEO and the chief operating officer will be appointed with approval of both companies. The two firms will have three nominees each on the board of the new entity.
Aditya Birla and Vodafone eventually aim to own an equal share of the joint venture.
The merger excludes Vodafone's 42 per cent stake in Indus Towers and will be effected through issuing new shares in Idea to Vodafone, which will result in Vodafone deconsolidating Vodafone India.
This is the second merger in the sector in as many months. Last month, Bharti Airtel announced plans to buy the Indian business of the Norway-based Telenor.
The merged venture will create India's largest mobile operator with almost 400 million users and a 35 per cent market share by customers. The deal gives Vodafone India an implied enterprise value of Rs 82,800 crore and Idea an enterprise value of Rs 72,200 crore.
Vittorio Colao, CEO of Vodafone, the world's second-biggest mobile operator by subscribers, said the two companies will continue to operate under their current brands indefinitely, but will eventually work under the same name.
He did not expect major regulatory hurdles to the deal as he ruled out any chance of the lingering tax dispute with the government to affect the merger process.
Idea Cellular fell 7.9 per cent to Rs 99.50 after surging as much as 14.5 per cent.
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