Idea Cellular, Vodafone To Merge, Create India’s Largest Telecom

Idea Cellular on Monday declared that its board has approved the merger of Vodafone India. Its wholly-owned subsidiary Vodafone Mobile Services limited with itself within the process creating the country’s largest telecom entity. Vodafone can hold 45 % in the combined entity. idea promoters can hold a 26 % in the combined entity. AB group can have the right to buy 9.5 % stake in the entity at Rs 130 per share.

Idea Cellular, Vodafone To Merge, Create India’s Largest Telecom:

India's Largest Telecom

India’s Largest Telecom

Under the terms of agreement, the merger should completed within 24 months. “Upon the amalgamation of becoming effective, the entire business of VIL and VMSL ( excluding VIL’s investment in Indus Towers) can vest in the company,” idea Cellular aforesaid in a statement. “Vodafone can own 45.1 percent of the combined company after transferring 4.9 percent to Idea’s promoters. Or its affiliates for Rs 38.74 lakh crore in cash concurrent. Idea promoters can hold 26.1 percent of the company and the balance will be held by public,” according to the filing.

According to a CNBC-TV18 report, the deal has been found with an implied enterprise valuation of Vodafone India Rs 82,800 crore which of idea Cellular at Rs 72,200 crore.

India's Largest Telecom

India’s Largest Telecom

According to a report by broking firm CLSA in Jan, the merged entity can have revenues of over Rs 80,000 crore.  Since giving it a 43 % market share by revenues and a 40 % market share by active subscriber base. The behemoth can account for over 25 % of allocated spectrum. And also can have to sell about 1 percent to comply with spectrum cap norms.

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It will be an all-share merger of Vodafone India (excluding Vodafone’s 42 % stake in Indus Towers) and idea. The merger effected through the issue of new shares in idea to Vodafone and would result in Vodafone deconsolidating Vodafone India. The merger can more intensify competition in the country’s highly-contested telecom space. Wherever players are gunning for both revenue and subscriber additions.

India's Largest Telecom

India’s Largest Telecom

The combined entity can take on the likes of market leader Bharti Airtel and Reliance Jio. The latest entrant within the telecom sector. Also Reliance Jio, is quick acquiring subscribers on the back of free voice and data services under its Happy new year offer and Jio Prime subscription.

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Last month, India’s largest telecommunication operator Bharti Airtel informed the bourses on Thursday that it’ll acquire Telenor India’s assets. Since the exit of the Norwegian telecommunication company from India comes at a time. Hence when new entrant Reliance Jio has acquired 100 million users.

India's Largest Telecom

India’s Largest Telecom

Rumours of consolidation are doing the rounds following a poor response to the spectrum sale last year that earned the govt. Only a fraction of Rs 5.63 lakh crore it had envisaged. New entrant Reliance Jio’s aggressive push to gain market share is additionally seen as a major trigger for consolidation within the sector.

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