Kumar Mangalam Birla will be the non-executive chairman and Balesh Sharma the new CEO of the merged entity, which will remain listed
The Department of Telecommunications (DoT) on Thursday gave final approval to the merger of Vodafone India and Idea Cellular, setting the stage for the new entity that will dislodge Bharti Airtel from its leadership position in the country's telecom industry.
The new entity will be named Vodafone Idea Ltd. Kumar Mangalam Birla will be the non-executive chairman and Balesh Sharma the new CEO of the merged entity, which will remain listed.
Confirming the development that DoT has given a final approval to the Vodafone-Idea merger, Kumar Mangalam Birla, during a conference in Mumbai said, "I think it is an exciting journey ahead of us with Idea Cellular and Vodafone India coming together and the actual work starts now. We are very optimistic about it."
The combined entity will be worth $23 billion with 430 million subscribers and 35 % market share. Bharti Airtel has about 377 million users.
The development was confirmed by a senior official from the Department of Telecommunications. The next process is to inform the Registrar of Companies (RoC) and get the company registered.
The approval has come with a rider that the merged entity will have to abide by the decisions of Telecom Disputes Settlement and Appellate Tribunal and other courts. Earlier in July, DoT had given a conditional nod for the merger and raised a demand of Rs 7,268.78 crore.
Earlier this week, both the companies made the payment of Rs 7,268.78 crore, including Rs 3,926.34 crore paid in cash and Rs 3,342.44 crore furnished as bank guarantees.
Vodafone will own 45.1 stake in the combined entity, while Aditya Birla Group will have 26% and Idea shareholders 28.9%.
This has been the last phase of the consolidation in the telecom industry triggered by entry of Reliance Jio. Since Jio's entry in September 2016, many smaller players have exited the market, while some of the big ones have announced merger deals. Airtel acquired Telenor India and is in the process of acquiring wireless operations of Tata Group. Reliance Jio is buying out wireless assets of Reliance Communications. Aircel has declared bankruptcy.
The industry has been sitting on a combined debt of Rs 5.6 lakh crore and the arrival of Reliance Jio started a tariff war, putting pressure on margins of telecom players.
While announcing its results on Wednesday, Vodafone Group CEO Vittorio Colao had said that the company expects the merger to close in August. "In India, where competition remains intense, we have now received conditional approval from the Department of Telecom for the merger of Vodafone India and Idea Cellular, which we aim to close before the end of August, allowing us to unlock substantial synergies."
Vodafone India's service revenue fell 31% in the first quarter to 955 million (Rs 7,666 crore) in the three months ended June this year.
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