Idea-Vodafone merger: making of India's largest telecom entity

Forming the country's largest telecom entity, by revenue and subscribers, Idea Cellular a subsidiary of Aditya Birla Group (AB Group) announced its board's approval to merge with Vodafone India on Monday.

In Idea's merger with Vodafone India's wholly-owned subsidiary Vodafone Mobile Services, Vodafone will hold 45 per cent stakes in the merged entity and Idea Cellular will hold 26 per cent stakes. AB Group will have the right to buy 9.5 per cent stake in the combines entity at a rate of Rs 130 per share. 

The all share merger of the telecom giants is expected to generate a combined revenue of over Rs 80,000 crore, envisaging a 43 per cent market share by revenues for the company. While the combined unit's subscriber base is expected to go as up as 40 per cent. The combined entity now accounts for over 25 per cent of the allocated spectrum, exceeding the spectrum cap norms. Thus, the company will have to sell off 1 per cent of its aggregate spectrum.   

The merger, that is expected to take over market leaders Bharti Airtel and Reliance Jio, will be implemented through the issue of new shares in Idea to Vodafone, resulting in Vodafone deconsolidating Vodafone India. 

As on March 20, 2017 at 10:49 AM, Idea Cellular was trading at Rs 99.70 on the bourses, down by 7.60 per cent.

The merger is expected to further intensify the cut-throat competition between the telecom giants, even as Jio is resolute to acquire more subscribers base and revenue through its Happy New Year Offer and Jio Prime subscription offer.