Vodafone India and Idea Cellular Limited got final approval from the Department of Telecom (DoT) to merge their business. The new entity will be known as Vodafone Idea Limited, which creates India’s largest mobile operator with about 35 percent market share and nearly 430 million subscribers.
Sunil Bharti Mittal led Bharti Airtel is the current market leader in the telecom space with 344 million customers.
Idea and Vodafone India will now contact the Registrar of Companies (RoC) of the various approvals received, wrapping up the last leg of formalities.
Idea Cellular and Vodafone India, earlier this week, made joint payment of Rs.7,268.78 crores ‘under protest’ to the government. This included Rs. 3,926.34 crore paid in cash and Rs. 3,342.44 crore furnished as bank guarantees.
The combined might of Idea and Vodafone will result in a telecom juggernaut worth over USD 23 billion (or over Rs 1.5 lakh crores), with a 35 percent market share and a subscriber base of around 430 million. Kumar Mangalam Birla will be the non-executive Chairman and Balesh Sharma the new CEO of the merged entity, which will remain listed.
The merger is expected to bolster the efforts of the debt-ridden firms Idea Cellular and Vodafone to take on the intense competition in the market where entry of Reliance Jio – backed by India’s richest man Mukesh Ambani – has led to a bruising tariff war. Vodafone will own 45.1 stake in the combined entity, while Aditya Birla Group will have 26 percent and Idea shareholders 28.9 percent. Shares of Idea Cellular closed 3.64 per cent higher on BSE at Rs. 56.95 a piece.
The Aditya Birla Group has the right to acquire up to a 9.5 percent additional stake from Vodafone under an agreed mechanism with a view to equalising the shareholdings overtime. If Vodafone and the Aditya Birla Group’s shareholdings in the combined company are not equal after four years, Vodafone will sell shares in the combined company to equalise its shareholding to that of the Aditya Birla Group over the following five-year period.