New Delhi/Mumbai, March 20 (IANS) In one of the biggest mergers in the telecom space, Vodafone India and Aditya Birla Group-promoted Idea Cellular on Monday announced their much-awaited amalgamation.
Kumar Mangalam Birla, Chairman of the Aditya Birla Group, will be its Chairman.
“Vodafone Group and Idea Cellular announced they have reached an agreement to combine their operations in India (excluding Vodafone’s 42 per cent stake in Indus Towers) to create India’s largest telecom operator,” a joint statement by the companies said.
“The combined company would become the leading communications provider in India with almost 400 million customers, 35 per cent customer market share and 41 per cent revenue market share,” it added.
Idea Cellular in a regulatory filing said its Board of Directors “has approved the scheme of amalgamation of Vodafone India Ltd and its wholly owned subsidiary Vodafone Mobile Service Ltd with the company (Idea)”.
The merger will create an entity with over Rs 80,000 crore revenue.
“Vodafone will own 45.1 per cent of the combined company after transferring a stake of 4.9 per cent to the promoters of Idea and/or their affiliates for Rs 3,874 crore in cash concurrent with the completion of the amalgamation,” the statement said.
“The promoters of Idea will hold 26 per cent of the company and the balance will be held by the public.”
The merged entity will have around a 406 million subscriber base, replacing the current dominant player Bharti Airtel (around 269 million customers).
“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,” said Kumar Mangalam Birla.
“Idea and Vodafone will together create a very valuable company given our complementary strength,” he added.
Vittorio Colao, Chief Executive, Vodafone Group Plc, said: “The combination of Vodafone India and Idea will create a new champion of Digital India founded with a long-term commitment and vision to bring world-class 4G networks to villages, towns and cities across India.
“The combined company will have the scale required to ensue 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 of every Indian,” he added.
“We are very complementary. Idea is strong where Vodafone is weaker and Vodafone is strong where Idea is weaker,” Colao pointed out.
Both Idea Cellular and Vodafone India are present in all 22 telecom circles in India and have 4G connectivity in 17 circles.
The agreement contemplates the completion of the proposed amalgamation within 24 months.
“The name of the combined listed company will be changed in due course,” the statement added.
Allaying apprehensions on the fate of employees in both companies, Birla assured that they do not foresee “any significant downsizing” post-merger, indicating little chances of job losses in the new entity.
Rajan S. Mathews, Director General, Cellular Operators’ Association of India, said: “This trend of mergers and consolidation, will remain a positive development, benefiting customers, operators and the government in the long run on global lines.
“The need of the hour, however, is a predictable, stable, long term, regulatory and policy environment, to ensure the financial health of telecom service providers and a conducive environment for continued investments for a fully connected and digitally empowered India.”
Earlier, there were 13 telecom operators in India as opposed to four or five now.
“Consolidation is a much anticipated and very welcome development in this beleaguered telecom sector. It will help bring in operational efficiencies and improved quality of service to customers,” said Arpita Pal Agrawal, Partner and Leader-Telecom, PwC India.
Idea Cellular’s stock prices crashed on Monday. It closed around 10 per cent down at Rs 97.60 per share in the BSE.