Mumbai: British telecom giant Vodafone will merge its Indian subsidiary with local rival Idea Cellular within two years, Idea said on Monday, creating a new market leader better able to contest a brutal price war.
Vodafone will own 45.1% of the merged entity, after it transfers about 4.9% to promoters of Idea and/or their affiliates for Rs 38.74 billion ($592.15 million) in cash, Idea said, announcing one of the biggest mergers in the telecom space.
The combined Vodafone-Idea group would be India’s largest telecom operator with almost 400 million customers, or 35% market share. With 204.68 million customers, Vodafone enjoys market share of 18.16 per cent. Idea has 16.9 per cent with 190.51 million customers as of December 2016, according to Trai data. Airtel, with a market share of 23.58% and a customer base of 265.85 million, leads the market both in terms of revenue and customer base.
The merged entity, which will come into force over the next two years, will be headed by Kumar Mangalam Birla as Chairman. Vodafone will have its nominee as the chief financial officer, its CEO Vittorio Colao said at a press meet In Mumbai, which was also attended by Birla. Colao said that both the brands, considering their strengths, will continue to operate separately.
The merged entity will have revenue of over Rs 80,000 crore, translating into a 43% share by revenue and 40 per cent by active subscriber base with around 400 million customers.
The merger comes after India’s mobile industry was thrown into turmoil with the launch last year of Reliance Jio Infocomm, the new 4G mobile broadband network built at a cost of more than $20 billion by Mukesh Ambani as part of his Reliance Industries conglomerate. Jio has made an impact with free voice calls and cut-price data services, forcing India’s three biggest operators — Bharti Airtel, Vodafone and Idea — to slash prices and accept lower profits.
DEAL DECODED
Vodafone will own 45.1% in the new company after transferring 4.9% to the Aditya Birla group for Rs 3,874 crore in cash
Idea will hold 26% of the combined entity while the rest will be owned by public shareholders.
With 204.68 million customers, Vodafone enjoys market share of 18.16%. Idea has 16.9% with 190.51 million customers as of December 2016
Airtel, with a market share of 23.58% and a customer base of 265.85 million, leads the market both in terms of revenue and customer base.
The merged entity will have revenue of over Rs 80,000 crore, translating into a 43% share with around 400 million.
What’s there for customers
Customers will benefit from better infrastructure, better services and better tariffs of the combined entity.
Customers of Idea Cellular and Vodafone presently do not enjoy free internet.
Coming together, both will have more fire power to retain customers. Once the entities are merged, customers will be migrated to the merged entity, like it happened to Hutchison Essar users, when it was bought by Vodafone.
