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