Vodafone India, Idea Cellular Get Government’s Approval For Merger

The government today gave final nod to the merger of Vodafone India and Idea Cellular, which will create the country's largest mobile operator.

The new telecom behemoth, Vodafone Idea Ltd., will be worth over $23 billion (or over Rs 1.5 lakh crore) with a 35 percent market share and a subscriber base of around 430 million. It will dislodge Bharti Airtel Ltd.—the current market leader with 344 million customers.

A senior Department of Telecom official privy to the development confirmed that the final approval has been accorded to the merger today and the two entities will now apprise the registrar of companies of the various approvals received, wrapping up the last leg of formalities.

The approval comes with the riders that the merged entity will have to abide by the decisions of the telecom tribunal and other courts.

The DoT had given conditional nod for the merger on July 9 and had asked the companies to meet the demands raised for taking the merger on record.

Following this, Idea Cellular and Vodafone India, earlier this week, made a joint payment of Rs 7,268.78 crore ‘under protest' to the government. This included Rs 3,926.34 crore paid in cash and Rs 3,342.44 crore furnished as bank guarantees.

Kumar Mangalam Birla will be the non-executive chairman and Balesh Sharma the new chief executive officer of the merged entity, which will remain listed.

The merger is expected to bolster the efforts of the debt-ridden firms Idea Cellular and Vodafone to take on the intense competition in the market where the entry of Reliance Jio Infocomm Ltd., backed by India's richest man Mukesh Ambani, has led to a bruising tariff war.

Vodafone will own a 45.1 percent stake in the combined entity, while Aditya Birla Group will have 26 percent and Idea shareholders will hold 28.9 percent. The Aditya Birla Group has the right to acquire up to a 9.5 percent additional stake from Vodafone under an agreed mechanism to equalise shareholdings over time.

If Vodafone and Aditya Birla Group's shareholdings in the combined company are not equal after four years, Vodafone will sell shares in the entity to equalise shareholdings over the following five-year period.

Vodafone Group CEO Vittorio Colao yesterday said the company expects the merger to close in August. “In India, where competition remains intense, we have now received a conditional approval from the Department of Telecom for the merger of Vodafone India and Idea Cellular, which we aim to close before the end of August, allowing us to unlock substantial synergies,” Colao had said.

Shares of Idea Cellular today closed 3.6 percent higher at Rs 56.95 apiece on the BSE.