In a bid to contest a brutal price war sparked by new rival Reliance, Britain’s Vodafone Group and Idea Cellular agreed on Monday to merge their Indian operations to create the country’s biggest telecoms business.
The combined Vodafone-Idea group would have almost 400 million customers, or 35 percent market share, with an implied enterprise value of 828 billion rupees ($12.66 billion) for Vodafone and 722 billion rupees for Idea.
“The combined entity will become the leading challenger with the scale to compete more effectively,” Idea said in the statement.
Reliance’s Jio has made an impact with free voice calls and cut-price data services, forcing India’s three biggest operators – Bharti Airtel, Vodafone and Idea – to slash prices and accept lower profits.
Vodafone, the world’s second-largest cellphone operator, will own 45.1 percent of the merged entity, after it transfers about 4.9 percent to promoters of Idea and/or their affiliates for 38.74 billion rupees ($592.15 million) in cash, Idea said.
Aditya Birla Group, the majority owner of Idea, will own 26 percent while other shareholders will own the remaining 28.9 percent. Aditya and Vodafone eventually aim to own an equal share of the joint venture.
The joint venture will have a combined enterprise value of $23.2 billion.
The Vodafone-Idea merger would exclude the British telecom operator’s 42 percent stake in Indus Towers, a joint venture between Airtel, Vodafone, and Idea.
As per a Bloomberg Quint report, the merged unit will have 1120MHz spectrum across the five bands, making it the biggest holder of spectrum in India. Analysts say that once the new entity is formed, it would be better to compete over content, rather than start a new price war.
Source-Adage
Mediatrix 