Idea, Vodafone India announcer merger, now biggest entity in telecom industry

Idea-Vodafone merger: According to reports, Vodafone India has insisted on retaining the CEO and CFO positions.

By: Express Web Desk | New Delhi | Updated: March 20, 2017 10:05 am

Idea Celluar’s Board has approved a merger with Vodafone India, making it the biggest telecom entity in the country. The merger is expected to be completed in 2018. According to a statement released, promoters of Idea and Vodafone will have the right to nominate three directors each. Idea will have its nominee as chairman while CFO will be from Vodafone’s nominee. Both CEO and COO will be a joint decision taken by both parties.

In a filing with BSE, the telecom company said Vodafone will hold 45 per cent in the combined entity. Idea promoters will hold a 26 per cent in the combined entity. Meanwhile, Idea shares have hit a six-month high on the merger approval with Vodafone India.

The entire business of VIL and VMSL, excluding VIL’s investment in Indus Towers, international network assets and IT platforms, to vest in company. On amalgamation of VMSL becoming effective, the company shall issue shares to VIL equal to 47 percent of post issue paid-up capital.

Promoters of Idea, Vodafone have right to nominate 3 directors each while promoters of Idea have sole right to appoint chairman. The appointment of CEO, COO will require approval of both promoters of Idea and Vodafone. Vodafone has the right to appoint CFO of company.

Promoters of Idea have right to buy up to 9.5 per cent additional stake from Vodafone under agreed mechanism with view of equalising shareholdings over time. Until equalisation is achieved, voting rights of additional shares held by Vodafone will be restricted and votes will be exercised jointly.

Idea will contribute all of its assets including standalone towers with 15.4k tenancies and 11.15 percent stake in Indus Towers. Vodafone will contribute Vodafone India including standalone towers with 15.8k tenancies but excluding 42 percent stake in Indus Towers. Vodafone will contribute 25 billion rupees more net debt than Idea at completion. Post-closing, combined company will be reported as a JV by Vodafone and accounted for under equity method.

As combined entity will be jointly controlled by Vodafone & Aditya Birla Group, Vodafone will deconsolidate Vodafone India immediately. Transaction expected to be accretive to Vodafone’s cash flow from the first full year post completion. Board of combined entity will comprise 12 directors including three directors appointed by Vodafone and Aditya Birla Group.

With inputs from Reuters

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  1. N
    Narendra M
    Mar 20, 2017 at 12:12 pm
    1. Once it became clear that Reliance Jio will be a tough compeor with deep pockets, both Idea and Vodafone managements realised that have no choice but to merge. They have lost no time to take a decision and declared it today. Question is this: what would customers of telecom services in India get from merger of these two companies? We will have to wait and see. 2. As compared to quick merger decision made by Idea and Vodafone, one can see how decision about merger of BSNL and MTNL, two telecom companies of the Central government, has been discussed and postponed a number of times. BSNL and MTNL have lost market share very rapidly and both are in red. Their merger is considered is one way necessary for survival and making their business profitable. I guess that in both companies a voluntary retirement scheme (VRS) has to be implemented and cost of VRS has to borne by the Central government. But obviously bureaucrats in the concerned ministries, technocrats in these companies and companies’ employees are not ready to face the reality. Reality is that these companies can never make profit in the changed scenario wherein the fast changes in technology have made business of landlines, the main revenue earner of these two companies, irrelevant.
    Reply
    1. R
      rakesh
      Mar 20, 2017 at 5:57 am
      good
      Reply
      1. S
        Sreesheel Sreekumar
        Mar 20, 2017 at 6:49 am
        With very few players, customers will have few options ! Cartelisation ??
        Reply