The board of the Aditya Birla-backed Idea Cellular has approved the merger application with Vodafone India and Vodafone Mobile Services, according to a notification to the BSE.
The board of the Aditya Birla-backed Idea Cellular has approved its merger application with Vodafone India and Vodafone Mobile Services, according to a notification to the BSE.
Soon after markets opened, the shares of Idea Cellular were trading at Rs 112.00, up Rs 4.10 or 3.80% from previous close.
The merger, when it comes though, will mark the first consolidation amongst the existing players after the Mukesh Ambani-backed Reliance Jio's entry into the telecom market in September last year.
"Upon the amalgamation becoming effective, the entire business of Vodafone India and Vodafone Mobile Services (VMSL) (excluding the former's 42% stake in Indus Towers Limited, its international network assets, and information technology platforms) will vest in the Company," Idea told the bourses.
To make the merger possible, "Vodafone India will be deconsolidated by Vodafone on announcement and reported as a joint venture post-closing. It will help the Vodafone Group to cut its net debt by nearly $8.2 billion (nearly Rs 54,552.5 crore)," a statement from Vodafone said.
It told the BSE that the merger would be "subject to receipt of necessary approvals of shareholders, creditors, Sebi, stock exchanges, the Competition Commission of India (CCI), the Department of Telecommunications, the Foreign Investment Promotion Board, the Reserve Bank of India, and other governmental authorities and third parties (as may be required)." Subject to the necessary approvals, Vodafone said it expects the merger to be completed in 2018.
Birla clarified that Idea's deal to merge its operations with Vodafone India will not lead to any job cuts at the Aditya Birla Group company.
Vodafone India and Vodafone Mobile Services have a combined turnover of about Rs 454 billion while Idea has a turnover of about Rs 360 billion.
In the merged entity, Vodafone will own 45.1% of the company, transferring a stake of approximately 4.9% to the promoters of Idea and/ or their affiliates for Rs 38.74 billion in cash. Idea's promoters will hold 26% of the company while the balance will be held by the public.
Idea told the bourses, "on the scheme of amalgamation of VMSL with the company becoming effective, the Company shall issue an aggregate number of equity shares of the Company to VIL equal to 47% of the post issue paid-up capital of the company on a fully diluted basis. Immediately there after on the amalgamation of VIL with the company, the shares issued to VIL pursuant to the amalgamation of VMSL with the company shall stand cancelled and, post such cancellation, the company shall issue an aggregate number of equity shares of the company equal to 50% of the post issue paid up capital of the company to the shareholder of Vodafone."
Features of the merged entity
According to Idea Cellular, the merger will ensure the "creation of the largest Indian telecom opperator with the widest mobile network in the country and pan India 3G/ 4G footprint;" it will ensure "sufficient spectrum to compete with major operators while offering innovative and attractively priced mobile services; acceleration of expansion of wireless broadbank networks across India, subtrantial cost and capex synergies, and leveraging the customer's affinity for both the existing brands."
- The promoters of both - Idea Cellular and Vodafone India - would have the right to nominate three directors each. The board will also consist of independent directors.
- Idea's promoters would have the sold right to appoint the Chairman while the appointment of the CEO and the COO will need a nod from the promoters of both the companies.
- Vodafone would have the right to appoint the CFO.
- Decisions like shares issue, consolidation, liquidation, entry into related party transactions, change to the name or key brands or branding strategy would need a nod from the promoters of both the companies.
- If Vodafone and the Aditya Birla Group's shareholdings in the combined company are not equal after four years, Vodafone will sell down shares in the combined company to equalise its shareholding to that of the Aditya Birla Group over the following five-year period.
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