Business

Vodafone to Merge India Operations With Idea Cellular

The combined Vodafone-Idea group will be India’s largest telecom operation with almost 400 million customers, or 35% market share.

Can the combined Vodafone-Idea entity take on the Jio juggernaut? Credit: Reuters

Can the combined Vodafone-Idea entity take on the Jio juggernaut? Credit: Reuters

Mumbai: Britain’s Vodafone Group will merge its Indian subsidiary with local rival Idea Cellular within two years, Idea said on Monday, creating a new market leader better able to contest a brutal new price war.

Vodafone will own 45.1% of the merged entity, after it transfers about 4.9% to promoters of Idea and/or their affiliates for 38.74 billion rupees ($592.15 million) in cash, Idea said.

The combined Vodafone-Idea group would India’s largest telecom operation with almost 400 million customers, or 35% market share.

The merger comes after India’s mobile industry was thrown into turmoil with the launch last year of Reliance Jio Infocomm, the new 4G mobile broadband network built at a cost of more than $20 billion by India’s richest businessman, Mukesh Ambani, as part of his Reliance Industries conglomerate.

Jio has made an impact with free voice calls and cut-price data services, forcing India’s three biggest operators Bharti Airtel , Vodafone and Idea to slash prices and accept lower profits.

Idea said the companies expected cost and capex synergies of about $10 billion in net present value after integration costs and spectrum payments. Idea will have the sole right to appoint the chairman, while Vodafone will appoint the chief financial officer, it said.

The appointment of a chief executive officer and a chief operating officer would require the approval of both companies, which would get the right to nominate three board members each.

Vodafone, the world’s second-largest cellphone operator, has endured a tumultuous ride since it entered India in 2007, with fierce competition and a high-profile tax battle making a business contributing more than 10 percent of its revenues and profits its most unpredictable by far.

Shares in Idea rose as much as 14.25% immediately after the merger news but gave up gains to be trading up 3.2% at 10:00 AM IST.

(Reuters)