Idea, Vodafone announce merger; Kumar Mangalam Birla to be Chairman of the new entity

New Delhi: Idea Cellular board on Monday approved merger of Vodafone India Ltd and its wholly-owned arm Vodafone Mobile Services with the company, a move that will create the country's biggest telecom services provider with a customer base of over 394 million.

"Vodafone Group Plc and Idea Cellular today announced that they have reached an agreement to combine their operations in India," they said in a statement to the Bombay Stock Exchange.

After their merger, the firms announced Kumar Mangalam Birla as the Chairman of the new entity.

"I am pleased and honored to be the chairman of the new company," said Kumar Mangalam Birla who is expected to create India`s largest telecom firm with a revenue share of around 40 percent and a subscriber base of over 380 million."It gives me immense pleasure that we reached to an agreement to merge our companies Idea Cellular and Vodafone.

We are number two and number three companies in present telecom sector with a customer base of 400 million," he added.

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

Idea will have the sole right to appoint the chairman.

Both the companies had confirmed last month that they are in talks to create a telecom giant which will take on Reliance Jio, the aggressive new entrant flush with cash, and the entrenched leader Bharati Airtel.

The merged company will a revenues in the Rs 77,500- 80,000 crore range and the pretax profit margins will be around 28 percent, an India Rating report had said.

For the industry as a whole, even though Reliance Jio's aggressive posturing will continue to cause troubles in the near-term, the merger is a credit positive and may help improve the return on capital employed by 3 percentage points by financial year 2019, while the total capital deployed will also rise by 90 percent.

The merged entity's subscriber base will 37 percent of the industry, compared to Airtel's 262 million, while the revenue market share will be around 30 percent as same as Airtle's.

With Agency Inputs