Idea-Vodafone merger gets government nod; to create largest telecom operator in India

The government has approved the merger of Idea Cellular and Vodafone India, the sector’s biggest, but some formalities are pending for the final closure of the deal, Telecom Minister Manoj Sinha said on Wednesday.

“We have already approved merger of Idea-Vodafone. There are some formalities which are pending that they have to complete for it (the merger),” Sinha told reporters on the sidelines of a BSNL event—the first on-record confirmation from the government side.

Vodafone top management met minister Sinha on Tuesday after the deal was given a conditional approval by the Department of Telecom on July 9.

“They met me and to thanked that we have done it very quickly,” Sinha said.

After meeting Sinha on Tuesday, Vodafone CEO designate and Chief Financial Officer Nick Read confirmed receiving the merger approval letter.

“We are happy to receive the letter,” he had said.

There have been industry speculations that Idea Cellular and Vodafone, the British telecom firm, may challenge in court the demand of Rs 3,976 crore for one-time spectrum charge of Vodafone India, and joint bank guarantee of Rs 3,342 crore sought by DoT before it grants final approval for the merger.

Vodafone executives did not respond to queries over their plans to make payment and furnishing bank guarantee.

“Yes. I am optimistic” that the new entity, to be named Vodafone Idea Ltd, will be in place before he remits the office,” Vodafone CEO Vittorio Colao, who will remain in office till October, said.
When asked for plans of the British telecom firm post the new entity comes in place, Read said: “We have always been a strong investor in India. We will remain that”.

The combined operations of Idea and Vodafone will create the country’s largest telecom operator worth over $23 billion (or over Rs 1.5 lakh crore), with a 35 per cent market share and a subscriber base of around 430 million.

Debt-ridden firms Idea and Vodafone India are in the process of merging their businesses in India as it is expected to reduce operations costs and give them relief from cut-throat competition in the market where margins have hit rock bottom with free voice calls.

Vodafone Idea will have the capacity to provide 4G spectrum in all telecom circles of the country.
According to Idea, the combined 4G spectrum of both the companies is capable of offering up to 450 megabit per second broadband speed on mobile phones in 12 telecom areas in the country.

With the new entity coming in force, Bharti Airtel will lose the tag of India’s biggest telecom service provider to the new entity.  The combined debt of both the companies is estimated to be around Rs 1.15 lakh crore.

Vodafone will own 45.1 per cent stake in the combined entity, while Kumar Mangalam Birla-led Aditya Birla Group will hold 26 per cent and Idea, 28.9 per cent.

The Aditya Birla Group has the right to acquire up to 9.5 per cent additional stake from Vodafone under an agreed mechanism with a view to equalising the shareholding over time.

Balesh Sharma will be the new CEO of the merged entity. Idea’s chief financial officer Akshaya Moondra will head the financial operations of the new entity as its CFO. Ambrish Jain, currently the deputy MD at Idea Cellular, is set to become the new chief operating officer.

(With PTI inputs)