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Posted at: Mar 21, 2017, 1:01 AM; last updated: Mar 21, 2017, 1:01 AM (IST)

Idea, Vodafone tie knot, biggest operator is born

Aditya Birla Group Chairman Kumar Birla to head merged entity

Deal dynamics

  • 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 concurrent with completion of the merger
  • Idea will hold 26% of the combined entity while the rest will be owned by public shareholders
  • The all-share merger for both partners excludesVodafone’s 42% stake in Indus Towers

Idea shares tank nearly 10%

  • Shares of Idea tumbled nearly 10% on Monday, wiping out Rs 3,692 crore from the company's market valuation, after the announcement of the deal
Idea, Vodafone tie knot, biggest operator is born
Aditya Birla Group Chairman Kumar Mangalam Birla (L) shakes hands with Vodafone Group CEO Vittorio Colao after a news conference in Mumbai on Monday. Reuters
Tribune News Service & PTI

Mumbai, March 20

British telecom major Vodafone and Aditya Birla group firm Idea Cellular today announced the merger of their Indian operations, creating the largest mobile operator by customer and revenue market share.

The merged entity, which will come into force over the next two years, will be headed by Kumar Mangalam Birla as Chairman. However appointments of chief executive and chief operating officers will require approval of the Boards of both the companies.

Vodafone will have its nominee as the chief financial officer, its CEO Vittorio Colao said here at a press meet, which was also attended by Birla.

“This landmark combination will enable the Aditya Birla group to create a high quality digital infrastructure that will transition the Indian population towards a digital lifestyle and make the government’s Digital India vision a reality. For Idea shareholders and lenders who have supported us thus far, this transaction is highly accretive, and Idea and Vodafone will together create a very valuable company given our complementary strengths,” said Kumar Mangalam Birla, chairman, Aditya Birla Group.

The all-share merger for both partners excludes Vodafone’s 42% stake in Indus Towers and will be effected through issuing new shares in Idea to Vodafone and result in Vodafone deconsolidating Vodafone India.

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 concurrent with completion of the merger.

Idea will hold 26% of the combined entity while the rest will be owned by public shareholders. Idea and Vodafone said the merged entity will be jointly controlled by Vodafone and the Aditya Birla group as per shareholders’ agreement.

With 204.68 million customers, Vodafone enjoys market share of 18.16%. Idea has 16.9% market share 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.

According to CLSA report in January, the merged entity will have revenue of over Rs 80,000 crore, translating into a 43% share by revenue and 40% by active subscriber base with around 400 million customers.

The combined venture will account for over 25% of the allocated spectrum and will have to sell about 1% (worth Rs 5,400 crore) to comply with spectrum cap norms.

“The merger pegs implied enterprise valuation of Rs 82,800 crore ($12.4 billion) for Vodafone India and Rs 72,200 crore ($10.8 billion) for Idea,” according to an exchange filing by Idea.

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