Vodafone, Idea Cellular Merger Announced; Envisioned to Complete Within 2 Years

Vodafone, Idea Cellular Merger Announced; Envisioned to Complete Within 2 Years
  • Vodafone will own 45.1 percent of the merged entity
  • Idea Cellular will have the sole right to appoint the chairman
  • The combined entity will have 400 million customers in India

Vodafone Group will merge its Indian subsidiary with local rival Idea Cellular within two years, Idea said on Monday. Vodafone will own 45.1 percent of the merged entity, after it transfers about 4.9 percent to promoters of Idea and/or their affiliates for Rs. 3,874 crores ($592.15 million) in cash, Idea said. Idea will have the sole right to appoint the chairman.

Idea shares rose as much as 14.25 percent immediately after the merger news but gave up gains to be trading up 3.8 percent at 3:55am GMT.

"Vodafone Group Plc and Idea Cellular today announced that they have reached an agreement to combine their operations in India," they said in a statement to the Bombay Stock Exchange (BSE).

"The combined company would become the leading communications provider in India with almost 400 million customers, 35 percent customer market share and 41 percent revenue market share," the statement added.

The confirmation ended months of speculation that the two operators were ready to sign a deal to help fend off Reliance Jio, whose recent arrival has shaken up India's ultra-competitive mobile network market.

Reliance Jio, which began operations last year, is owned by India's richest man Mukesh Ambani. The 4G Jio network launched in September with an audacious free service for the rest of 2016, followed by vastly cheaper data plans and free voice calls for life.

It forced rivals to dramatically slash their tariffs and left them scrambling to match the deep pockets of Jio, which is backed by India's hugely wealthy energy-to-chemicals conglomerate Reliance Industries.

Shares in Idea rose almost four percent in Mumbai following announcement of the Vodafone deal.

Written with agency inputs


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