Idea Cellular, Vodafone India announce merger

Market Live Sensex Nifty lower on profit booking Idea up 15% on Vodafone merger

"We expect to develop common IT system for combined entity and larger scale to drive cost efficiency", he said.

Idea said it would issue equity shares to Vodafone India after the scheme of amalgamation with VMSL, which would be equal to 47 per cent of the post-issue paid-up capital of the company on a fully-diluted basis.

The newly merged firm will be valued at $23.2 billion, based on the enterprise value of $12.4 billion for Vodafone India and $10.8 billion for Idea Cellular.

COAI also said that the tariff war has led the financial condition of industry at risk and increased the debt to Rs 4.3 lakh crore, which is eventually leading to a severe decline in government revenues from the sector.

"The combination of Vodafone India and Idea will create a new champion of Digital India founded with a long-term commitment and vision to bring world-class 4G networks to villages, towns and cities across India", said Vittorio Colao, CEO of Vodafone Group. Idea is set to include all of its assets including its standalone towers and its 11.15% stake in Indus Towers, with a total value of $10.8 billion excluding the Indus stake.

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Vodafone will own a 45.1 per cent stake in the the merged entity following the transfer of about 4.9 per cent of shares to promoters of Idea and and its affiliates for 38.74 billion rupees ($592.15 million) in cash, Idea said in a statement. Idea Cellular has a net worth of Rs 24,296 crore and turnover of Rs 36,000 crore.

The Birlas will have the right to acquire more shares from Vodafone under an agreed mechanism with a view to equalising the shareholdings over time, said a joint statement by the two companies.

Vodafone India will be deconsolidated by Vodafone and reported as a joint venture post-closing, reducing Vodafone Group's net debt by around United States dollars 8.2 billion.

Until equalisation is achieved, the voting rights of the additional shares held by Vodafone will be restricted and votes will be exercised jointly under the terms of the shareholders' agreement. In order to get the decision executed, the companies will require shedding some spectrum and subscribers to make sure that the regulatory approvals under the competition rules in India are complied with.

The combined entity is expected to cross the spectrum cap in 900 Mhz band in Maharashtra, Gujarat, Kerala, Haryana and UP West and in 2,500 Mhz band in Maharashtra and Gujarat.

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