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Vodafone India and Idea Cellular merge to form country's largest Telecom operator

The merger will create a level playing field in the telecom industry.

By Ajit Krishna | Mar 20, 2017, 12.58 PM IST
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Vodafone India and Idea Cellular announced the merger, which is the largest consolidation in India's telecommunication industry's history. The announcement was made after respective boards agreed to the merger. It has been on the cards since the announcement of Reliance Jio.

The combined entity is going to be the largest telecommunications service provider in the country with about 400 million customers, 35 percent customer market share, and 41 percent revenue market share. To put in perspective, Airtel has 31.7 percent revenue market share.

Read: Incumbents Airtel, Vodafone and Idea take on Reliance Jio with new Unlimited Plans

In the initial phase, Vodafone owns the major stake in the combined entity with 45.1 percent stake after which it will transfer 4.9 percent stake to Aditya Birla Group in exchange to Rs 3874 crores to complete the deal. Consequently, Aditya Birla Group will own 26 percent stake with an allowance to buy shares from Vodafone under stipulated agreement.

“The promoters of Idea have the right to acquire up to a 9.5% additional stake in from Vodafone. if Vodafone and the promoters of Idea do not have equal shareholding by the expiry of the fourth year from the completion of amalgamation, Vodafone is obliged to reduce its holding in order to equalise its ownership with that of the promoters of Idea over the following five years,” Idea Cellular said in a statement.

While Idea Cellular will have the prerogative in choosing the chairman of the company, the appointment of Chief Executive Officer (CEO) and Chief Operating Officer (COO) should need approval from the individual boards.

Kumar Mangalam Birla, Chairman of Aditya Birla Group, said, “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 valuable company given our complementary strengths.”

Also Read: Reliance Jio’s revised unlimited data plans vs the competition

The merger has created a level playing field where players like Bharti Airtel, Reliance Jio, and Idea-Vodafone may jump into the price war to gain a stranglehold on the market, which may further intensify the competition in the industry. At the end of the day, customers will be the beneficiaries in coming months.

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