The proposed merger between Vodafone India and Idea Cellular has received a nod from the Competition Commission of India (CCI). The nod will give a boost to the merger process, which will create India’s largest telecom operator with nearly 400 million customers and 41% revenue market share.
Vodafone is currently the second largest telco by users, while the Aditya Birla group-led Idea is third largest telco by users. Analysts say that the merged entity will be a stronger rival to Reliance Jio Infocomm and Bharti Airtel.
Notably, the launch of Jio with free voice and data offers between September last year and March 2017 was considered the main reason behind this proposed merger.
As per the agreement, Vodafone will own 45.1% in the combined entity after transferring 4.9% to the promoters of Idea Cellular for Rs 38,740 crore in cash post the merger. Kumar Mangalam Birla and other promoters of Idea Group will hold 26%, and the rest will be owned by the public.
Both the telcos had mutually decided that Kumar Mangalam Birla will be the Chairman of the newly formed division.
Recently, ICRA said that Vodafone India and Idea Cellular merger would take at least another four to five quarters to materialize, even as the proposed transaction set to face many regulatory hurdles.
ICRA had said that the merged Vodafone-Idea Cellular entity would have the financial flexibility to counter competition due to scale benefits and better usage of spectrum.
Vodafone India’s service revenue declined 8.7% year-on-year at 1,385 million euros in the quarter ended 30 June 2017 from 1,510 million euros for the same quarter last year. The company said that its organic service revenue declined 13.9% as a result of continued price competition from the new entrant and incumbents.
Vodafone India has been classified as discontinued operations for Group reporting purposes.
“From an operational perspective, the Group remains highly focused on the management of the business and committed to its success, both prior to the completion of the merger and thereafter,” Vodafone Group said in a statement.