Free Trial

Search
Global Telecoms Business
Global Telecoms Business Copying and distributing are prohibited without permission of the publisher

Vodafone and Idea to create Indian giant

20 March 2017

Merged company will have 400 million customers and India’s largest market share

Read more: Vodafone India Idea Cellular merger global services Indus Towers Bharti Airtel

Vodafone and Idea Cellular are to merge their mobile operations in India, to create the country’s largest operator, with 400 million customers and a market share of over 40%.

The deal, which will take until next year to complete, is the latest in a series of mergers that are restructuring the Indian market.

Vodafone group CEO Vittorio Colao said: "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."

Perhaps surprisingly, the combined business will retain its existing brands, said Colao. "We have two very strong brands."

The mobile merger will enable both companies to economise on 4G investment, said Nick Read, the group CFO. Vodafone has already started building LTE in its top 12 markets – or circles – but the two will not be able to collaborate until the deal is complete.

"We were previously only strong in 12 circles," said Colao in a conference call with Global Telecoms Business and other media on Monday. The combined company will be in first or second position in the market in 21 out of India’s 22 regions, and will have enough spectrum to provide new 4G services. "We have the depth of spectrum in those circles."

Vodafone and Idea – which is controlled by the Aditya Birla group, a conglomerate with interests from cement to financial services – will eventually own identical stakes in the combined company, after some adjustments over the first four years after completion.

Vodafone’s merger of its Indian operations with Idea Cellular will not affect the operations of Vodafone Global Services within the country. Colao confirmed that global services will remain with the UK-based Vodafone Group.

Also excluded from the deal are stakes in Indus Towers, which was set up in 2007 and provides cell towers to Vodafone, Idea and rival operator Bharti Airtel.

The companies say that the implied enterprise value of the combined operation will be is $12.4 billion for Vodafone India and $10.8 billion for Idea excluding its stake in Indus Towers. They say that there will be synergies of $10 billion after integration costs and spectrum liberalisation payments, and run-rate savings of $2.1 billion a year by year four after completion.








Advertisements