Vodafone and Idea Merge
Vodafone and Idea Cellular agreed on Monday to merge their operations in India. They cut a deal for $23 billion, thus creating India's largest telecom provider. This was the immediate response from Vodafone and Idea to the price war struck by Reliance Jio.
Both Vodafone and Idea combined now have almost 400 million customers. Thus, overtaking Bharti Airtel and taking the number one spot in the market. This deal shows how the telecom industry is transforming after the launch of Reliance Jio mobile network last year.
Jio started by India's richest man, Mukesh Ambani at the cost of more than $20 billion. Jio has been offering its customers free services for many months. And due to this all of the telecom operators in India like Bharti Airtel, Vodafone, Idea Cellular, etc. have had to slash prices and take home lower profits.
This improves the industry structure and it also equips us and Idea to be much more competitive in the future, I have no doubt that the Indian market will remain competitive but nothing can be free forever and we will be in a better position.
Vittorio Colao - Chief Executive
The news of these two companies had been emerging since January this year. Now they will have to shed spectrums in some areas to meet the Indian rules and regulations, although Colao reassuring the consumers said that it would be small. The deal is now expected to close in 2018.
About the deal
As per the deal, Vodafone will now own 45.1% of the merged entity, after the transfer of 4.9% to the promoters of Idea for a sum of 38.74 billion INR in cash.
Aditya Birla Group, the owner of Idea Cellular will own 26%. And the remaining 28.9% will be owned by the other shareholders. Aditya Birla Group and Vodafone aim to own an equal share of the joint venture. With the value of the new merged entity being $23.2 billion.
This deal does not include Vodafone's 42% in the Indus Towers. A joint venture between the British Group, Airtel and Idea. But commenting on this both the companies said that they would try and reduce their stakes in the Indus Towers by selling of their stakes in the joint venture.
This deal has happened after Jio has hit the market hard, and due to this even India's biggest telecom operator Bharti Airtel is now in the process of buying Telenor's India operations. And also Maxis and Sistema are merging with Reliance Communications.
