Vodafone India and Idea Cellular had agreed to a merger that would create India’s largest telecom operator worth over $23 billion.
Shareholders of Idea Cellular approved the merger of the company’s mobile business with Vodafone, India’s second-largest carrier. Almost all votes went in favor of the merger.
Earlier this year, Vodafone India and Idea Cellular had agreed to a merger that would create India’s largest telecom operator worth over $23 billion. The combined entity would have more than 400 million subscribers and a market share of 43% in terms of revenue.
Idea and Vodafone approached the National Company Law Tribunal (NCLT) for seeking its nod, and were ordered to get shareholder approval, before going to the Department of Telecom for a final approval to the alliance.
Terms of the Merger
Idea Cellular said in a filing that more than 99% of shareholders had voted in favor of the merger, at the shareholders’ meeting held on October 12, 2017. The deal values Vodafone India at Rs.82,800 crore and Idea at Rs.72,200 crore. Following the completion of the merger, Vodafone will own a 45.1% stake in the combined entity and the Aditya Birla Group will own a 26% stake after paying Rs.3,874 crore cash for a 4.9% stake. The remaining 28.9% stake would be held by other shareholders.
Combatting Competition The move comes amidst fierce price competition from Reliance Jio and Bharti Airtel. These companies are eager to extend their foothold in India, the world’s second-largest telecommunications market, with a subscriber base of 1.05 billion, as estimated by India Brand Equity Foundation. India’s tele-density (number of telephone connections per 100 individuals) has risen 17.9 in FY07 to 92.59 in FY17.
In response to Idea-Vodafone merger talks, Bharti Airtel last week announced its merger with Tata Teleservices’ mobile business. Earlier this month, however, Reliance Communication announced the termination of a merger deal with Aircel, citing legal and regulatory hurdles, apart from other reasons.
The Idea-Vodafone merger has received conditional approval from SEBI and unconditional approval from the Competition Commission of India (CCI). The deal is expected to be completed by March 2018.