British mobile phone giant Vodafone will merge its Indian unit with Idea Cellular to create the country’s largest telecoms operator, the firms said on Monday.
“Vodafone Group Plc and Idea Cellular today announced that they have reached an agreement to combine their operations in India,” they said in a statement to the Bombay Stock Exchange (BSE).
“The combined company would become the leading communications provider in India with almost 400 million customers, 35 percent customer market share and 41 percent revenue market share,” the statement added.
The confirmation ended months of speculation that the two operators were ready to sign a deal to help fend off Reliance Jio, whose recent arrival has shaken up India’s ultra-competitive mobile network market.
Reliance Jio, which began operations last year, is owned by India’s richest man Mukesh Ambani.
The 4G Jio network launched in September with an audacious free service for the rest of 2016, followed by vastly cheaper data plans and free voice calls for life.
Vodafone will hold 45 percent in the combined entity, Idea promoters 26 percent, and the rest by the public. Vodafone’s 45 percent stake is after selling a 4.9 percent stake to the Idea promoters for Rs 3,900 crore, allowing the Birla Group to up its stake to 26 percent.
At a public event last week, Gopal Vittal, Bharti Airtel’s Managing Director for India and South Asia said the telecom industry’s financial health was at its weakest ever with a massive debt burden that exceeded Rs 4.5 lakh crore. The combined debt of the Vodafone-Idea stands at Rs 1.07 lakh crore.
The deal is expected to be closed sometime in 2018
At a press conference to discuss the details of the merger, Aditya Birla Group Chairman Kumar Birla tried to downplay fears of job lay offs following the merger.“For a company with such size there will be enough growth opportunities; I don’t expect a significant downside,” he said in response to a question.
“For a company with such size there will be enough growth opportunities; I don’t expect a significant downside,” he said in response to a question.
Vodafone Group CEO Vittorio Colao said both brands would exist after the merger. “Both brands will continue to exist and we will leverage on both brands,” he said.