voda idea

Telecom Evolution Continues in India with Idea-Voda merger

Finally, the speculations have come to an end. Vodafone India and Idea Cellular have officially announced the merger, becoming the largest telecom operator in the country.

Idea-Voda  are joining hands to give a stiff competition to Reliance Jio, the telecom company with the highest subscriber base. The deal is expected to close by 2018.

Their respective boards have approved their merger, excluding Vodafone’s 42 percent stake in Indus Towers.

Vodafone will own 45.1 percent in the combined entity after transferring 4.9 percent to the promoters of Idea Cellular, the Aditya Birla group for Rs 3,8740 crore in cash to complete the merger. Aditya Birla group will hold 26 percent.

As per the agreement, promoters of Idea have the right to acquire up to a 9.5 percent additional stake from Vodafone to equalise shareholding. Once the merger is completed and if both the companies do not have equal shareholding by the end of the 4th year, Vodafone will have to reduce its holding to equalise its ownership over the 5th year. Until the share equalisation is complete, additional shares held by Vodafone will be restricted, and votes will be exercised jointly.

The statement further confirmed that Chairman of the combined entity would be chosen from Idea, whereas CFO will be put forth from Vodafone. Both CEO and COO will be a joint decision taken by both parties.

Ratings agency Fitch said in a statement, “We estimate the merger would create an entity with 390 million subscribers, a leading revenue market share of around 40 percent, revenue of $11bn-12bn, and an EBITDA margin of about 28 percent-30 percent.

The latest merger in the telecom industry is expected to intensify the competition in India’s telecom space. Until date, Airtel was the largest telecom operator in India, but with the entry of the new entity, Airtel will be pushed to the second spot.

Furthermore, the telecom industry is expecting more merger news in 2017. Reliance Communications has reportedly entered into an agreement to merge its wireless business with rival Aircel. Earlier this year, Bharti Airtel had announced an agreement to buy Norwegian company Telenor’s operations in six Indian states. BSNL and MTNL are also speculated to be heading for a merger.


Leave a Reply

Your email address will not be published. Required fields are marked *