The U.K.’s Vodafone and Kumar Mangalam Birla-owned Idea Cellular on Monday (March 20) announced that they have set the ball rolling for a mega merger deal.
The combined entity, with roughly Rs 80,000 crore of annual revenues and 400 million customers, will become the largest telecom provider in the country.
Vodafone-Idea combine will have a 41 percent market share by revenues, and 35 percent market share by subscribers.
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.
Moreover, the amalgamation of the two telecom giants will put them in a better position to take on Reliance Jio.
Shares in Idea rose as much as 14.25% immediately after the merger news but gave up gains to be trading up 3.8%.
Aggressive entry of Reliance Jio has launched a big price war. With its free services, Jio has upset the bigger players.
The Vodafone-Idea merged entity is expected to add fuel to the fire.
However, many industry pundits have predicted that Vodafone-Idea merger will mark the beginning of end of the tariff wars.
The Vodafone-Idea consolidation will leave only three big companies in the telecom industry.