Idea to merge with Vodafone India! Time to say ‘hello’ to India's biggest telco

Indian telecom industry is going to see a big merger, the result of which would displace Airtel from the position of market leader.

The board of Idea Cellular, owned by Kumar Mangalam Birla, has announced that it has approved of a merger with Vodafone India and its wholly owned subsidiary Vodafone India Mobile Services.

The name of the new entity has not been decided yet, but it’s known that Vodafone India's business except its investments in Indus Towers will be a part of it.

Vodafone will have a 45.1% share in the new entity, and the merger would see a transfer of 4.9% shares to the promoters of Idea Cellular for Rs 38,740 crore in cash. Out of the remaining stake, 26% will be held by Kumar Mangalam Birla and other promoters of Idea Group, leaving the rest for the public.

It would take the merger 24 months to be completed, subject to approvals from shareholders, creditors, stock exchanges, SEBI, the telecom department and Competition Commission of India.

More details about the merger would be out later today.

The board of the new entity would comprise of three directors nominated by the promoters of Idea and Vodafone both. Idea’s nominee will serve as the chairman while Vodafone’s nominee would be the CFO. CEO and COO positions would be decided by both parties together.

The agreement between Idea and Vodafone says that Idea promoters would be able to acquire up to a 9.5% additional stake from Vodafone with a view to equalise shareholding overtime.

In case both Idea and Vodafone hold equal shareholding by the end of the 4th year after the completion of the merger, Vodafone will have to reduce its holding so that the ownership can be equalised over the 5th year. Until then, additional shares held by Vodafone will be restricted and votes will be exercised jointly.

The new entity will have enough spectrums to compete with all major operators, and would also be able to offer attractively priced 3G and 4G mobile services to its consumers, which would be a boost since the telcos are under constant threat from newly launched Reliance Jio.

Also read: Reliance Jio will be unfazed by Vodafone-Idea merger. Here’s why

After Jio launched its services, the telecom industry went through a consolidation phase and many leading players looked for a merger to stay afloat.

Also read: Reliance Communications likely to merge with Tatas to take on Vodafone-Idea merger, rising power of Reliance Jio

(Image source: Jio Care)