British telecommunications giant Vodafone has given the green light to its Indian unit to merge with Idea Cellular in order to create India’s largest telecoms operator. The merger has been made out of necessity following the emergence of 4G newcomer Reliance Jio.
Reliance Jio has disrupted the competitive Indian telecommunications market since it entered the sector in September, 2016. The company which is owned by India’s richest man, Mukesh Ambani - announced its arrival in emphatic fashion by offering vastly cheaper data packages and free voice calls for life. That subsequently led Norwegian operator Telenor to see its operations in India to Bharti Airtel.
The merger between Vodafone India and Idea Cellular has been touted for a number of months now – but it was officially confirmed by both organizations in a joint statement which was released to the Bombay Stock Exchange (BSE). The statement read, “Vodafone Group Plc and Idea Cellular today announced that they have reached an agreement to combine their operations in India. 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.”
Following the merger, shares prices In Idea have rose by almost 4% in Mumbai – the partnership between Idea and Vodafone will now ensure it overtakes Bharti Airtel as India’s largest telecoms operator. It’s believed that Vodafone will hold 45.1% of the merged entity – while Idea will have 26%.
According to reports from Bloomberg the merger will be worth around $23.2 billion based on the combined enterprise value of both organizations. It has also been disclosed that both companies will nominate three directors each in order to form a board.
Global brokerage firm CLSA has estimated that the Vodafone-Idea tie-up would command a revenue market share of 43 percent by the start of the 2019 financial year ahead of Airtel on 33 percent. Jio would have 13 percent.
The combination of Vodafone India and Idea will create a new champion of Digital India founded with a long-term commitment and vision to bring world class 4G networks to villages, towns and cities across India," Vodafone Group chief executive Vittorio Colao said in the statement.