The U.K.’s Vodafone and Aditya Birla group firm Idea Cellular on March 20, 2017 announced that they have kickstarted a mega merger deal.
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, Idea said.
Idea will have the sole right to appoint the chairman.
Kumarmangalam Birla will be the Chairman of merged Vodafone-Idea entity and both the companies will have equal stakes in the merged entity over a period of time.
The combined market share of both the telcos add up to 43%, making it the largest telecom firm, surpassing Bharti Airtel.
The merger will create an entity with a revenue of around INR 77,500-80,000 crore besides eliminating duplication of spectrum and infrastructure capex, Ind-Ra assesses.
The spectrum of Vodafone India in seven circles and that of Idea in two, whose permits are expiring in 2021-22, is together valued at around INR 12,000 crore as per the last auction price.
These permits are not in common circles, and hence there could be potential spectrum capex synergies between the two companies, the report said.
The Merger Deal: Know More- Complete business of VIL and VMSL, excluding VIL's investment in Indus Towers, international network assets and IT platforms, to vest in co.
- Once amalgamation of VMSL becomes effective, co shall issue shares of co to VIL equal to 47% of post issue paid-up capital of co.
- Vodafone to own 45.1% of combined co after transferring about 4.9% to promoters of Idea and/or affiliates for INR 38.74 billion in cash
- Board of combined entity will be comprised of 12 directors including 3 directors appointed by each of Vodafone and Aditya Birla Group
- Promoters of Idea, Vodafone have the right to nominate 3 directors each
- Promoters of Idea have the sole right to appoint chairman
- Vodafone has the right to appoint CFO of company
- Appointment of CEO, COO will require approval of promoters of Idea and Vodafone
- Promoters of Idea have right to buy up to 9.5% additional stake from Vodafone under the agreed mechanism with view of equalising shareholdings over time
- Agreement contemplates completion of proposed amalgamation with a period of 24 months
- Till equalisation is achieved, voting rights of additional shares held by Vodafone will be restricted and votes will be exercised jointly
- Idea to give all of its assets including standalone towers with 15.4k tenancies and 11.15% stake in Indus Towers
- Vodafone to give Vodafone India including standalone towers with 15.8k tenancies but excluding 42% stake in Indus Towers
- Vodafone will add 25 billion rupees more net debt than Idea at completion
- Post-closing, combined company will be a JV by Vodafone and accounted for under equity method
- As combined entity will be controlled jointly by Vodafone & Aditya Birla Group, Vodafone will de consolidate Vodafone India immediately
