Vodafone India Merger with Idea Cellular Creates Country's Biggest Telecoms Business

Idea Cellular approves Vodafone merger with itself shares gain

Idea Cellular on Monday said that its board of directors have approved the merger of Vodafone India and its wholly-owned subsidiary Vodafone Mobile Services with itself.

The planned combination would create India's largest wireless-network operator with nearly 400 million customers and bolster Vodafone's position in one of the world's fastest-growing telecom markets.

The shares of Idea, the country's third-largest mobile operator, declined around 10 percent after gaining up to 15 percent in the initial trading.

The GSM group represents Bharti Airtel, Idea Cellular, Vodafone India, Aircel and new entrant Reliance Jio.

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

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. The UK-listed firm will retain the largest stake in the merged entity with a 26 per cent share, though Idea as the option to buy up shares in the future. Vodafone India will be deconsolidated by Vodafone and reported as a joint venture, reducing Vodafone Group net debt by approximately $8.2 billion.

Vodafone will keep its 42 per cent consideration in Indus Towers out of the merger process.

The implied enterprise value for Vodafone India stands at Rs 82,800 crore while that of Idea Cellular stands at Rs 72,200 crore, excluding its stake in Indus Towers.

The agreement contemplates the completion of the proposed amalgamation within 24 months.

The deal is expected to close in 2018 following regulatory approvals. The companies expects to save about $2 billion annually by the fourth year after the merger.

"The name of the combined listed company will be changed in due course", the statement added.

Vodafone's operations in India have taken a toll on the company's bottom line, with the group reporting a first half loss of €5 billion ($5.9 billion) on a similar-sized writedown linked to a fierce price war in the market led by Reliance Jio Infocomm, a cut-price operator with the financial backing of billionaire Mukesh Ambani.

This will bring a new leader in a market that's so competitive after India's richest man offered phone calls for free. It closed around 10 per cent down at Rs 97.60 per share in the BSE.

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