Idea Cellular, Vodafone to merge, create Rs 80,000 crore telecom giant:

The merger will create India’s largest telecom player both in revenues and subscribers, taking on the likes Bharti Airtel and Reliance Jio.

Idea Cellular on Monday announced that its board has approved the merger of Vodafone India and its wholly-owned subsidiary Vodafone Mobile Services Limited with itself in the process creating the country’s largest telecom entity.

Vodafone will hold 45 percent in the combined entity. Idea promoters will hold a 26 percent in the combined entity. AB Group will have the right to buy 9.5 percent stake in the entity at Rs 130 per share.

Under the terms of agreement, the merger should be completed within 24 months.

“Upon the amalgamation of becoming effective, the entire business of VIL and VMSL ( excluding VIL’s investment in Indus Towers) will vest in the company,” Idea Cellular said in a statement.

“Vodafone will own 45.1 percent of the combined company after transferring 4.9 percent  to Idea’s promoters or its affiliates for Rs 38.74 lakh crore in cash concurrent… Idea promoters will hold 26.1 percent  of the company and the balance will be held by public,” according to the filing.

According to a report by broking firm CLSA in January, the merged entity will have revenues of over Rs 80,000 crore, giving it a 43 percent market share by revenues and a 40 percent market share by active subscriber base. The behemoth will account for over 25 percent of allocated spectrum and will have to sell about 1 percent to comply with spectrum cap norms.

It will be an all-share merger of Vodafone India (excluding Vodafone’s 42 percent stake in Indus Towers) and Idea. The merger will be effected through the issue of new shares in Idea to Vodafone and would result in Vodafone deconsolidating Vodafone India.

The merger will further intensify competition in the country’s highly-contested telecom space where players are gunning for both revenue and subscriber additions.

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