Idea merges with Vodafone to create India's largest, world's 2nd largest telecom company

India's telecom industry will soon ring in a new order. Vodafone India and the Kumar Mangalam Birla-owned Idea CellularBSE -9.55 % are to merge to create the country's biggest phone company by subscribers, dislodging Bharti AirtelBSE 0.76 %, which has been at the top for 15 years. The new Rs 1.55 lakh crore entity will also be the world No. 2 after China Mobile. 

The deal will see Aditya Birla Group, the promoters of Idea, gradually raising its stake in the combined entity while V .. 

The deal will see Aditya Birla Group, the promoters of Idea, gradually raising its stake in the combined entity while Vodafone Group will reduce its own, with the aim of both holding equal stakes over a period of time. 
As a first step, AB Group will acquire 4.9 per cent from Vodafone for Rs 3,874 crore, or Rs 108 a share, to take its stake to 26 per cent, with Vodafone holding 45.1 per cent. Further, the company will have the right to buy another 9.5 per cent (at Rs 130 a share or the prevailing market price, depending on the time of purchase) in the combined entity over four years from the British telecom firm. 

Vodafone India storeImage copyrightGETTY IMAGES

UK telecoms giant Vodafone has merged its Indian business with Idea Cellular, India's third-largest network, to create the country's largest operator.
The combined company will have almost 400 million customers, accounting for 35% of the market share, the firms said in a statement.
The announcement ends months of speculation over an impending deal.
Analysts say the merger was to fend off competition from a new operator - Reliance Jio.
Owned by the country's richest man, Mukesh Ambani, Jio has forced Vodafone India and Idea Cellular, together with current market leader Bharti Airtel, to cut prices.
Shares in Idea rose almost 4% in Mumbai following the announcement of the deal.
India's leading mobile networks are embroiled in what analysts have described as "a vicious price war", started by the arrival of Jio.
More than 10 telecom operators are battling it out to try to attract India's one billion mobile phone users.
That has forced firms to keep tariffs low, significantly affecting their profitability.


It was interesting that both companies decided to hold an off-camera press conference to announce such a big merger.
But midway through the conference, it became clear that there were still many operational issues which needed to be ironed out.
How will they brand the new entity? Who will be the new CEO? These questions were not answered at the press conference.
It will take 18-20 months for the whole merger process to complete. Some job cuts are also expected as both the firms align operations to trim costs.
But the merger should ring in good news for customers because the new entity is expected to slash prices to compete with Reliance Jio.
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