Vodafone-Idea merger: A telecom giant is born amid Reliance Jio threat

Vodafone, Idea merger to create biggest telco in the country

 

 

Facing intense competition from cash-rich Reliance Jio, the Aditya Birla Group and British telecom giant Vodafone Plc on Monday announced the merger of their Indian wireless telephony businesses, creating the largest telecom operator in the country.

In a news conference in Mumbai, Vodafone Group Plc Chief Executive Officer (CEO) Vittorio Colao and Aditya Birla Group Chairman Kumar Mangalam Birla said the merger would create a new champion of digital India. It would launch new services soon.

As the first step of the merger, Birla-owned Idea Cellular and Vodafone India would merge their operations at a swap ratio of 1:1. Then, Birla’s holding companies would buy a 4.9 per cent stake from Vodafone at Rs 110 per share, investing close to Rs 3,900 crore. This will increase Idea’s stake to 26 per cent and bring down Vodafone Plc’s stake to 45.1 per cent. The Birlas would have the right to acquire another 9.5 per cent stake from Vodafone in the next four years, so that both partners eventually hold an equal stake in the company (about 35.5 per cent each).

             

“Consolidation is a much-anticipated and welcome development in this beleaguered sector. It will help bring in operational efficiencies and improved quality of services for customers. The regulatory regime will have to ensure that benefits of effective competition continue to be availed by customers,” said Arpita Pal Agrawal, partner and leader – Telecom, PwC India.  Before the transaction is completed, Vodafone and Idea also plan to sell their standalone tower assets and Idea’s 11.15 per cent stake in Indus Towers to reduce leverage in the combined company. | ( READ MORE )