Published: Tue, March 21, 2017
Global Media | By Meredith Barber

12 things you need to know about Vodafone - Idea Cellular merger

12 things you need to know about Vodafone - Idea Cellular merger

Vodafone announced this morning that it will combine its subsidiary Vodafone India with Idea in a deal valued at $23 billion, creating the largest telco in the country by revenue and subscriber numbers.

Vodafone India's "merger of equals" with Idea will create the largest mobile operator in India, with around 400 million customers, overtaking Airtel, and making it four times the size of Jio.

The merger comes after India's mobile industry was thrown into turmoil with the launch a year ago of Reliance Jio Infocomm, the new 4G mobile broadband network built at a cost of more than $20 billion by India's richest businessman, Mukesh Ambani, as part of his Reliance Industries (RELI.NS) conglomerate.

The confirmation ended months of speculation that the two operators were ready to sign a deal to help fend off the Mukesh Ambani-backed Reliance Jio, whose recent arrival has shaken up India's ultra-competitive mobile network market. Birla, who will be chairman of the combined business, personally led talks with Vodafone Chief Executive Officer Vittorio Colao, people with knowledge of the matter said.

Vodafone will own 45.1% of the combined company after transferring a 4.9% stake to the Aditya Birla Group for $579 million in cash, concurrent with completion of the merger. The merger will not include Vodafone's 42 percent stake in Indus Towers Ltd., another local company.

The deal is expected to close in 2018 following regulatory approvals.

Aditya Birla Group, the majority owner of Idea, will own 26 percent while other shareholders will own the remaining 28.9 percent.

ETX's Wilson said: "Cost synergies are the Vodafone-Idea deal's big selling point".

The merger of the Vodafone India, India's second largest telco, and Idea, the third largest player, would topple Bharti Airtel from the number one spot, creatng India's largest telecom player by revenue and subscribers.

Vodafone India will be deconsolidated by Vodafone and reported as a joint venture post-closing, reducing Vodafone Groups net debt by around Dollars 8.2 billion.

But both Idea and Vodafone said they would use their respective stakes in Indus Tower as well as standalone tower assets to reduce debt.

Colao also said the merger makes possible synergies of Dollars 10 billion.

Bharti Airtel is in the process of buying Telenor's India operations, while two smaller players controlled by Malaysia's Maxis and Russia's Sistema are merging their operations with Reliance Communications' wireless unit. Cellular body COAI also termed the merger of Idea Cellular and Vodafone India as a "bold" move and said the combined stronger entity will be beneficial to both government and consumers of the Indian telecom market.

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