The board of Idea Cellular today finalised the scheme of amalgamation with Vodafone India and it's subsidiaries, creating an entity with a revenue of around Rs 77,500-80,000 crore.
The merger of the second largest telecom player in the country with the third largest will create the largest telecom firm in the country.
As per the agreement, Vodafone will own 45 percent of the combined entity with both the companies' promoters having rights to appoint 3 directors each.
However, Idea will have sole rights to appoint Chairman of the combined entity, while Vodafone will have the right to appoint the CFO. The merger is expected to be completed in calendar year 2018.
Idea promoters will have rights to acquire an additional 9.5 percent in the company. Both idea and Vodafone will sell their respective tower businesses prior to the merger.
The merger has been in the works ever since the commercial launch of Reliance Jio 's operations in September. The entry of the largest private conglomerate into the telecom sector had forced other players, already reeling under high debt and competition to look at synergies and consolidation.
Last month, PTI had reported that the UK firm and Aditya Birla group company are likely to finalise the deal within a month.
The British telecom major has brought its ex-India unit chief Marten Pieters to work on the proposed merger.
The combined entity will create India’s largest telecom firm with a revenue share of around 40 percent and a subscriber base of over 380 million, according to India Ratings and Research.
The proposed merger of Vodafone India and Idea will create an entity with a revenue of around Rs 77,500-80,000 crore besides eliminating duplication of spectrum and infrastructure capex, the rating agency said in its report.
Further, 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 Rs 12,000 crore as per 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.
However, given the present spectrum holding, revenue and subscriber base, both the companies need to work on synergy to comply with rules.
According to the merger and acquisition rules, an entity should not hold more than 25 percent spectrum allocated in a telecom circle and 50 percent on spectrum allocated in a particular band in a service area.
The merged entity should also not have more than 50 percent revenue and subscriber market share.
As per CLSA report, the merged entity would breach revenue market share, subscriber and spectrum caps in five markets.
The combined entity as per present scenario will breach spectrum cap in 900 Mhz band in Maharashtra, Gujarat, Kerala, Haryana and UP West and in 2500 Mhz band in Maharashtra and Gujarat, it said.
CLSA estimated that the excess spectrum which would need to be surrendered or sold off is valued around Rs 5,400 crore and for the merger both the companies will also have to shell out Rs 5,700 crore for liberalising radiowaves that they were allocated administratively.
(With PTI inputs)
Updated Date: Mar 20, 2017 10:08 AM