Britain’s Vodafone Group Plc will merge its Indian operations with local rival Idea Cellular Ltd. within two years, Idea said on Monday.
Mumbai, March 20: Britain’s Vodafone Group Plc will merge its Indian operations with local rival Idea Cellular Ltd. within two years, Idea said on Monday.
Vodafone Group will own 45.1% of the merged entity after it transfers about 4.9 percent to promoters of Idea and/or their affiliates for Rs 38.74 billion (592.15 million dollar) in cash, Idea said.
Idea will have the sole right to appoint the chairman.
Shares in Idea rose as much as 14.25 percent immediately after the merger news but gave up gains to be trading up 3.8 percent.
The move came in the face of stiff competition after the launch of Reliance industries Ltd’s Reliance Jio.
Cellular Carriers in India are seeking to merge after Reliance Jio Infocomm Ltd, backed by billionaire Mukesh Ambani, introduced free services in September, 2016, undermining industry revenue.
The competitive pressure is creating an alliance between the country’s No. 2 provider, Vodafone India, and its third largest, Idea, controlled by Aditya Birla Group.
Another Billionaire Kumar Mangalam Birla, the Industrialist and Chairman-Birla Group, will be the chairman of the new entity, according to the people.
Vodafone could decide to sell part of its stake in the merged company, while the Birlas would likely offer to buy shares from other investors after the merger to bring their holding to about 26 percent, according to the people.
The telecom industry in India is already reduced to a four players’ game — Reliance Jio being the new one, and Bharti Airtel, Vodafone and Idea as the incumbents.
Marginal players such as Reliance Communications, Aircel and Telenor are already looking at probable consolidation.
Proceedings may require the carriers to shed some spectrum and the users to ensure regulatory approval under India’s competition rules.
Vodafone and Idea are weighing options on excess airwaves—including selling or sharing them, people with knowledge of the matter said last month.