Idea+ Vodafone to Merge to form the Largest telecom Company

Idea Cellular Ltd and Vodafone India announced a merger on Monday to form the largest telecommunication company in India. A filing with the Bombay Stock Exchange said Vodafone will hold 45 percent in the combined entity while 26 percent will be with Idea promoters. Apart from the two, AB Group will have the right to buy 9.5 percent stake at Rs 130 per share, according to the filing. According to an earlier report by brokerage firm CLSA, the merged entity will have revenues of over Rs 80,000 crore. The combined entity will have 43 percent revenue market share and a 40 percent active subscriber base. The behemoth will account for over 25 percent of allocated spectrum and will have to sell about 1 percent to comply with spectrum cap norms. It will be an all-share merger of Vodafone India (excluding Vodafone's 42 percent stake in Indus Towers) and Idea. The merger will be effected through the issue of new shares in Idea to Vodafone and would result in Vodafone deconsolidating Vodafone India. This comes as the latest entrant in the telecom sector, Reliance Jio, is fast acquiring subscribers on the back of free voice and data services under its Happy New Year offer. Last week, India’s largest telecom operator Bharti Airtel informed the bourses on Thursday that it will acquire Norwegian telecom company Telenor India’s assets. Rumours of consolidation have been doing the rounds following a poor response to the spectrum sale last year which earned the government only a fraction of Rs 5.63 lakh crore it had envisaged. Reliance Jio’s aggressive push to gain market share is also seen as a major trigger for consolidation in the sector.