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10 Things to know about Vodafone India-Idea Cellular merger deal

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Vodafone India and Idea Cellular have finalised a merger deal, creating India’s largest telecom company. In one of the most competitive markets in the world, Reliance Jio, upon its arrival, completely changed it. This forced telecom giants Vodafone India and Aditya Birla group firm Idea Cellular to merge in order to thrive and compete. Together they have created the country’s largest telecom service provider which can boast of a customer base of more than 394 million.

The merger is said to increase competition in the telecom space where players are in a tussle to increase revenue and subscriptions. It is the competitive pressure which has created the alliance between Idea and Vodafone. In order to get the decision executed, the companies will require shedding some spectrum and subscribers to make sure that the regulatory approvals under the competition rules in India are complied with. If you are an Idea Cellular and Vodafone subscriber here are ten things you should know about the deal:

  1. Once the merger is complete, the entire business of Vodafone India and Vodafone Mobile Services Ltd (VMSL), excluding Indus Tower’s investment, international assets and IT platforms will vest in Idea.
  2. This move will create India’s biggest telecom services provider with a customer base of over 394 million.
  3. Vodafone will own 45.1% of the combined company after transferring a 4.9% stake to the Aditya Birla Group for $579 million in cash, concurrent with completion of the merger. Aditya Birla Group will hold 26% of the combined entity while the rest will be owned by public shareholders.
  4. According to Idea and Vodafone joint statement if Vodafone and the Aditya Birla Group’s shareholdings in the combined company are not equal after four years, Vodafone will sell down shares in the combined company to equalise its shareholding to that of the Aditya Birla Group over the following five-year period.

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  5. The combined company will have sufficient spectrum to compete effectively with the other major operators in the market. It would hold 1,850 MHz, including circa 1,645 Mhz of liberalised spectrum acquired through auctions. It will be capable of building substantial mobile data capacity, utilising the largest broadband spectrum portfolio with 34 3G carriers and 129 4G carriers across the country.
  6. According to TRAI data, Vodafone’s market share was 18.16 percent with 204.68 million mobile customers in December 2016 and that of Idea was 16.9 percent with 190.51 million. At present, Airtel with a market share of 23.58 percent and a customer base of 265.85 million is the country’s largest telecom player.
  7. Ahead of the merger transaction, Vodafone and Idea intend to sell their standalone tower assets and Idea’s 11.15% stake in Indus Towers to reduce leverage in the combined company.
  8. Vodafone will deconsolidate Vodafone India immediately. The merged entity will then be reported as a joint venture by Vodafone. The merged entity will be jointly controlled by Vodafone India and the Aditya Birla Group.
  9. While the Aditya Birla Group will have the sole right to appoint the Chairman (as one of its three directors. Accordingly, the Group’s chairman Kumar Mangalam Birla will be the chairman of the combined entity. However, vodafone will have the sole right to appoint the chief financial officer. The COO and CEO for the merged entity will be jointly picked by Vodafone and Idea.

The merger is expected to be completed in 2018.