Idea Cellular Ltd and Vodafone Plc on Friday announced completion of the $ 23.2 billion (approximately Rs 1.6 lakh crore) merger of their India operations to create the country’s largest telecom operator to take on competition from Reliance Jio.
The merged entity, called Vodafone Idea Ltd, will have a subscriber base of over 40.8 crore and a market share of over 35 per cent, overtaking Bharti Airtel to take numero uno spot, the two firms said in a joint statement.
Kumar Mangalam Birla, chairman of the Aditya Birla Group that owned Idea Cellular, will be chairman of the new company that will have a 12-member board of directors, it said.
It has a right to appoint the chief financial officer, and the two firms have together chosen Balesh Sharma as the CEO of the new company.
Himanshu Kapania has stepped down as managing director of Idea Cellular, but will continue as a non-executive director on the merged entity’s board.
The merger puts Vodafone India and Idea in a strong position to cut costs and thus compete effectively with Reliance Jio. Savings from the deal are estimated at Rs 14,000 crore.
Telecom sector has witnessed consolidation aimed at finding economies of scale after Reliance Jio ploughed USD 25 billion into a pan-India national 4G data service, offering free voice call and tariffs well below prevailing rates. Jio has amassed 230 million subscribers in two years of its launch.
Bharti Airtel fired the starting gun with the acquisition of the Indian business of Norway-based Telenor. It subsequently took over consumer mobile businesses of Tata Teleservices Ltd (TTSL) and Tata Teleservices Maharashtra Ltd (TTML).
Mobile markets in several parts of the world have been rocked by cheap upstarts, including T-Mobile in the US, Iliad in France and Hong Kong group CK Hutchison’s Three unit in other European markets.
“Today, we have created India’s leading telecom operator. It is truly a historic moment. And this is much more than just about creating a large business. It is about our vision of empowering and enabling a new India and meeting the aspirations of the youth of our country,” said Birla.
The deal gives Vodafone India an implied enterprise value of Rs 82,800 crore and Idea an enterprise value of Rs 72,200 crore. Vodafone will own 45.1 per cent of the new business while the Aditya Birla Group, Idea’s parent company, will own 26 per cent after paying Rs 3,900 crore cash for a 4.9 per cent stake.
Vodafone Idea will have a pan India revenue market share of 32.2 per cent and the No.1 position in 9 circles, the statement said.
It will have over 3,40,000 broadband sites covering 84 crore Indians, largest voice network with over 2,00,000 unique GSM sites to cover over 1.2 billion Indians (92 per cent population coverage), large spectrum portfolio of 1,850 MHz and an adequate number of broadband carriers to provide superior consumer experience across 2G, 3G and 4G platforms, and widest distribution network with over 1.7 million retailers and 15,000 branded stores to service customers.