Vodafone on Monday confirmed that it is in talks with the Aditya Vikram Birla group for the merger of its Indian entity and Idea Cellular, a deal which will be the largest of its kind in the country’s telecom space once it materialises.
The merger will create an entity with a subscriber base of over 400 million user, making it the largest telecom player in India.
It will also replace the current dominant player Bharti Airtel, which has over 260 million users on its network.
“Vodafone confirms that it is in discussions with the Aditya Birla Group about an all share merger of Vodafone India – excluding Vodafone’s 42 percent stake in Indus Towers – and Idea,” the Indian entity’s parent company said in a statement.
“Any merger would be effected through the issue of new shares in Idea to Vodafone and would result in Vodafone deconsolidating Vodafone India.”
Vodafone India has over 200 million subscribers, with a presence in all the 22 circles the country has been divided into. It intends to have 4G services in 17 circles, covering 2,400 towns, by the end of this fiscal.
Idea, on the other hand, says it has a similar subscriber base, also with a presence in all the 22 circles. It intends to have 4G services in 20 circles by March 2017.
Speculation about a possible merger has been doing the rounds for nearly a year.
It only intensified after Reliance Jio entered the market with its mega voice and data offer, with an announcement that voice will be free on its network for life.
However, the Aditya Vikram Birla Group had scoffed at media reports suggesting merger talks in their regulatory filings with the stock exchanges, though analysts found a lot of synergies in such a move.
Earlier this month, JP Morgan had spoken about the merits of such a merger. “This could unlock more than $9 billion in potential synergies and offer an elegant route to deconsolidating India, thereby helping focus (Vodafone’s) attention back onto a rebounding European equity story,” the investment banker said.
As regards Idea, it said, in the migration towards free voice regime, the company stands to be the most vulnerable. Idea has a higher of rural and semi-urban subscribers, who are not as data-hungry as the creamy users in metros and cities, where it has a relatively limited presence.
Analysts also maintained that the initial public offering by Vodafone India did not make sense.
“We believe an elegant alternative would be for Vodafone to reverse merge into locally listed peer Idea (a deal that offers Idea a solution to their mounting balance sheet challenges),” JM Morgan said.
With IANS inputsBack to latest news