Idea Cellular, Vodafone India announce merger

Shiv Kumar
Tribune News Service
Mumbai, March 20

Vodafone India and Idea Cellular on Monday jointly announced here that they would be merging to form, what analysts say, is India's biggest mobile phone company.

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In a statement released to the stock exchanges this morning, Idea Cellular said its board had approved the merger of Vodafone India and its wholly-owned subsidiary Vodafone Mobile Services Limited with itself.

While Vodafone will hold 45 per cent in the combined entity, Idea's promoters – the Aditya Birla group - will hold a 26 per cent in the merged entity.

As per the deal agreed to by both entities, the Aditya Birla group will also have the right to buy 9.5 per cent stake in the merged entity at Rs 130 per share.

The joint statement released by managements of both companies said the merger would be completed in the next 24 months.

"Vodafone will own 45.1 per cent of the combined company after transferring 4.9 per cent to Idea's promoters or its affiliates for Rs 38.74 lakh crore in cash.... Idea's promoters will hold 26.1 per cent of the company and the balance will be held by public," Idea Cellular said in its filing with the exchanges.

Analysts say, the enterprise valuation of Vodafone India was estimated at Rs 82,000 crore while Idea Cellular was valued at Rs 72,000 crore for the merger deal.

The merged entity is expected to have revenues of more than Rs 80,000 crore – or 43 per cent market share by revenues. It will also hold more than 25 per cent of the allocated spectrum. Around 1 per cent would have to be sold so that the company confirms to the cap on spectrum specified by the government, analysts said.

As per the merger deal, the chairman of the merged entity will be appointed by Idea Cellular. However, appointments of chief executive and chief operating officers will require approval of the boards of both the companies while Vodafone will have exclusive rights to appoint chief financial officer, according to the statement.

"This 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. For Idea shareholders and lenders who have supported us thus far, this transaction is highly accretive, and Idea and Vodafone will together create a very valuable company given our complementary strengths,” Kumar Mangalam Birla, chairman, Aditya Birla Group said in a statement.

Vodafone Group Plc chief executive officer, Vittorio Colao, said, “The combined company will have the scale required to ensure sustainable consumer choice in a competitive market and to expand new technologies—such as mobile money services—that have the potential to transform daily life for every Indian. We look forward to working with the Aditya Birla Group to create value for all stakeholders.”

Sources said both Vodafone and Idea will sell their standalone tower assets and their stake in Indus Towers to reduce debt. While Idea holds 11.5 per cent stake in Indus Towers, Vodafone holds a 42 per cent stake.