Vodafone India had started the process for its merger with Aditya Birla Group company Idea Cellular by approaching the department of telecommunications (DoT) even before Vodafone Group Chief Executive Officer Vittorio Colao’s plane touched down at Mumbai’s Chhatrapati Shivaji International Airport.
Vodafone last week approached the DoT for approval for its proposed merger with Idea. The approvals sought were for regulatory clearances under the central government’s mergers and acquisitions guidelines, sources said.
Idea on Monday announced its approval for the amalgamation of Vodafone India and its wholly owned subsidiary Vodafone Mobile Services with the company subject to approvals by shareholders, creditors, the Securities and Exchange Board of India, the Reserve Bank of India and other government authorities.
Experts described the merger as a game changer in the battle against new entrant Reliance Jio. The combined entity would possess the most spectrum available with a telecom company even after the two companies shed their incremental air waves in some circles, an expert said.
Idea and Vodafone will have to discard incremental spectrum in the 900 MHz and 2,500 MHz bands in the Gujarat, Maharashtra, Haryana, Kerala and Uttar Pradesh (West) circles so that the combined entity does not breach holding caps imposed by the Telecom Regulatory Authority of India (Trai).
It is a win-win situation for both companies and sends out a message to the competition that there is a consolidated player. The merger would also bring some stability to the sector, said Rajan S Mathews, director-general, Cellular Operators’ Association of India (COAI).
Mathews added the merger opened up avenues for both entities to raise funds from the market. The Vodafone-Idea merger means Bharti Airtel will have to relinquish its position as the country’s biggest telecom company. On February 23, Bharti announced the acquisition of Telenor India in a no-cash deal, which will see the Norwegian company leaving the country because its business had become unsustainable. Bharti will take over the outstanding amount for the spectrum Telenor had acquired and also its contracts for tower leases and infrastructure.