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Vodafone, Idea in $23 billion deal to create new Indian telecom leader

Reuters  |  MUMBAI 

By Devidutta Tripathy and Sankalp Phartiyal

(Reuters) - Britain's Group and Cellular agreed on Monday to merge their Indian operations in $23 billion deal, creating the country's biggest telecoms business after the entry of new rival sparked brutal price war.

The combined entity would have almost 400 million customers, overtaking market leader Bharti Airtel to account for about 40 percent of revenue of the world's second-biggest mobile phone services market by users after China.

The deal underscores how India's mobile industry is being transformed by the launch last year of Reliance Jio Infocomm's 4G mobile broadband network.

Built at cost of more than $20 billion by India's richest man, Mukesh Ambani, Jio has offered free services for months. That has forced India's three biggest operators - Bharti, and - to slash prices and accept lower profits, and sparked wave of consolidation in the sector.

"We are very complementary," Chief Executive Vittorio Colao told conference in after the deal was announced.

"is strong where is weaker, is strong where is weaker."

The two companies, which announced in January that they were in talks, will have to shed spectrum in some areas to meet India's rules, although Colao said it would be "small". The deal is expected to close in 2018.

Shares in rose as much as 14.3 percent immediately after the but then fell 9 percent as traders said the implied deal price for was well below the stock's close on Friday. shares were flat in London trading as of 0942 GMT.

said the rough deal price worked out to 72.5 rupees per share but stressed that was only for illustrative purposes and was not the actual price. Idea's shares closed at 108.10 rupees on Friday.

DEAL CONTOURS

Vodafone, the world's second-largest cellphone operator, will own 45.1 percent of the merged entity, after it transfers about 4.9 percent to promoters of or their affiliates for 38.74 billion rupees ($592.15 million) in cash, said.

Aditya Birla Group, the majority owner of Idea, will own 26 percent while other shareholders will own the remaining 28.9 percent. Aditya Birla and eventually aim to own an equal share of the joint venture, with combined enterprise value of $23.2 billion.

would have the sole right to appoint the chairman, while would appoint the chief financial officer. The appointment of chief executive officer and chief operating officer would require the approval of both companies, which would get the right to nominate three board members each.

Vodafone, which will cut its net debt by about $8.2 billion with the deal, has endured tumultuous ride since it entered India in 2007, with high-profile tax battle and long-delayed Indian listing. The South Asian country contributes more than 10 percent of its revenues.

Colao said on Friday the pending case, with India demanding more than $2 billion in taxes, will not affect the deal, which needs regulatory approval.

The deal does not include Vodafone's 42 percent stake in Indus Towers, joint venture between the British group, unit of Bharti Airtel and But and said they will look to reduce their tower assets exposure, including selling their stakes in the joint venture.

Analysts have said Jio's entry is the catalyst for mergers and exits of some foreign players.

Bharti Airtel is in the process of buying Telenor's India operations, while two smaller players controlled by Malaysia's Maxis and Russia's Sistema are merging their operations with Reliance Communications' wireless unit.

"Consolidation is much anticipated and very welcome development in this beleaguered telecom sector," said Arpita Pal Agrawal, partner and telecom analyst at PwC India.

($1 = 65.4050 Indian rupees)

(Writing by Rafael Nam and Devidutta Tripathy; Additional reporting by Swati Bhat in and Samantha Kareen Nair in BENGALURU; Editing by Stephen Coates and Muralikumar Anantharaman)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

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Vodafone, Idea in $23 billion deal to create new Indian telecom leader

MUMBAI (Reuters) - Britain's Vodafone Group and Idea Cellular agreed on Monday to merge their Indian operations in a $23 billion deal, creating the country's biggest telecoms business after the entry of a new rival sparked a brutal price war.

By Devidutta Tripathy and Sankalp Phartiyal

(Reuters) - Britain's Group and Cellular agreed on Monday to merge their Indian operations in $23 billion deal, creating the country's biggest telecoms business after the entry of new rival sparked brutal price war.

The combined entity would have almost 400 million customers, overtaking market leader Bharti Airtel to account for about 40 percent of revenue of the world's second-biggest mobile phone services market by users after China.

The deal underscores how India's mobile industry is being transformed by the launch last year of Reliance Jio Infocomm's 4G mobile broadband network.

Built at cost of more than $20 billion by India's richest man, Mukesh Ambani, Jio has offered free services for months. That has forced India's three biggest operators - Bharti, and - to slash prices and accept lower profits, and sparked wave of consolidation in the sector.

"We are very complementary," Chief Executive Vittorio Colao told conference in after the deal was announced.

"is strong where is weaker, is strong where is weaker."

The two companies, which announced in January that they were in talks, will have to shed spectrum in some areas to meet India's rules, although Colao said it would be "small". The deal is expected to close in 2018.

Shares in rose as much as 14.3 percent immediately after the but then fell 9 percent as traders said the implied deal price for was well below the stock's close on Friday. shares were flat in London trading as of 0942 GMT.

said the rough deal price worked out to 72.5 rupees per share but stressed that was only for illustrative purposes and was not the actual price. Idea's shares closed at 108.10 rupees on Friday.

DEAL CONTOURS

Vodafone, the world's second-largest cellphone operator, will own 45.1 percent of the merged entity, after it transfers about 4.9 percent to promoters of or their affiliates for 38.74 billion rupees ($592.15 million) in cash, said.

Aditya Birla Group, the majority owner of Idea, will own 26 percent while other shareholders will own the remaining 28.9 percent. Aditya Birla and eventually aim to own an equal share of the joint venture, with combined enterprise value of $23.2 billion.

would have the sole right to appoint the chairman, while would appoint the chief financial officer. The appointment of chief executive officer and chief operating officer would require the approval of both companies, which would get the right to nominate three board members each.

Vodafone, which will cut its net debt by about $8.2 billion with the deal, has endured tumultuous ride since it entered India in 2007, with high-profile tax battle and long-delayed Indian listing. The South Asian country contributes more than 10 percent of its revenues.

Colao said on Friday the pending case, with India demanding more than $2 billion in taxes, will not affect the deal, which needs regulatory approval.

The deal does not include Vodafone's 42 percent stake in Indus Towers, joint venture between the British group, unit of Bharti Airtel and But and said they will look to reduce their tower assets exposure, including selling their stakes in the joint venture.

Analysts have said Jio's entry is the catalyst for mergers and exits of some foreign players.

Bharti Airtel is in the process of buying Telenor's India operations, while two smaller players controlled by Malaysia's Maxis and Russia's Sistema are merging their operations with Reliance Communications' wireless unit.

"Consolidation is much anticipated and very welcome development in this beleaguered telecom sector," said Arpita Pal Agrawal, partner and telecom analyst at PwC India.

($1 = 65.4050 Indian rupees)

(Writing by Rafael Nam and Devidutta Tripathy; Additional reporting by Swati Bhat in and Samantha Kareen Nair in BENGALURU; Editing by Stephen Coates and Muralikumar Anantharaman)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

image
Business Standard
177 22

Vodafone, Idea in $23 billion deal to create new Indian telecom leader

By Devidutta Tripathy and Sankalp Phartiyal

(Reuters) - Britain's Group and Cellular agreed on Monday to merge their Indian operations in $23 billion deal, creating the country's biggest telecoms business after the entry of new rival sparked brutal price war.

The combined entity would have almost 400 million customers, overtaking market leader Bharti Airtel to account for about 40 percent of revenue of the world's second-biggest mobile phone services market by users after China.

The deal underscores how India's mobile industry is being transformed by the launch last year of Reliance Jio Infocomm's 4G mobile broadband network.

Built at cost of more than $20 billion by India's richest man, Mukesh Ambani, Jio has offered free services for months. That has forced India's three biggest operators - Bharti, and - to slash prices and accept lower profits, and sparked wave of consolidation in the sector.

"We are very complementary," Chief Executive Vittorio Colao told conference in after the deal was announced.

"is strong where is weaker, is strong where is weaker."

The two companies, which announced in January that they were in talks, will have to shed spectrum in some areas to meet India's rules, although Colao said it would be "small". The deal is expected to close in 2018.

Shares in rose as much as 14.3 percent immediately after the but then fell 9 percent as traders said the implied deal price for was well below the stock's close on Friday. shares were flat in London trading as of 0942 GMT.

said the rough deal price worked out to 72.5 rupees per share but stressed that was only for illustrative purposes and was not the actual price. Idea's shares closed at 108.10 rupees on Friday.

DEAL CONTOURS

Vodafone, the world's second-largest cellphone operator, will own 45.1 percent of the merged entity, after it transfers about 4.9 percent to promoters of or their affiliates for 38.74 billion rupees ($592.15 million) in cash, said.

Aditya Birla Group, the majority owner of Idea, will own 26 percent while other shareholders will own the remaining 28.9 percent. Aditya Birla and eventually aim to own an equal share of the joint venture, with combined enterprise value of $23.2 billion.

would have the sole right to appoint the chairman, while would appoint the chief financial officer. The appointment of chief executive officer and chief operating officer would require the approval of both companies, which would get the right to nominate three board members each.

Vodafone, which will cut its net debt by about $8.2 billion with the deal, has endured tumultuous ride since it entered India in 2007, with high-profile tax battle and long-delayed Indian listing. The South Asian country contributes more than 10 percent of its revenues.

Colao said on Friday the pending case, with India demanding more than $2 billion in taxes, will not affect the deal, which needs regulatory approval.

The deal does not include Vodafone's 42 percent stake in Indus Towers, joint venture between the British group, unit of Bharti Airtel and But and said they will look to reduce their tower assets exposure, including selling their stakes in the joint venture.

Analysts have said Jio's entry is the catalyst for mergers and exits of some foreign players.

Bharti Airtel is in the process of buying Telenor's India operations, while two smaller players controlled by Malaysia's Maxis and Russia's Sistema are merging their operations with Reliance Communications' wireless unit.

"Consolidation is much anticipated and very welcome development in this beleaguered telecom sector," said Arpita Pal Agrawal, partner and telecom analyst at PwC India.

($1 = 65.4050 Indian rupees)

(Writing by Rafael Nam and Devidutta Tripathy; Additional reporting by Swati Bhat in and Samantha Kareen Nair in BENGALURU; Editing by Stephen Coates and Muralikumar Anantharaman)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

image
Business Standard
177 22