Vodafone India and Idea Cellular completed their long-awaited merger, creating the country’s largest mobile operator with more than 400 million subscribers.
The tie-up was first announced in March 2017, but it took more than a year to gain all the necessary regulatory approvals. The final hurdle was cleared last month after the companies paid $1 billion to the country’s Department of Telecommunications (DoT) in fees related to spectrum costs.
In a statement, the companies said the new entity – Vodafone Idea – becomes operational as India’s leading telecoms service provider with more than 408 million subscribers combined, overtaking long-time market leader Bharti Airtel.
Vodafone said it expects the merged entity to generate annual cost savings of INR140 billion (€1.7 billion. The component companies generated revenue of €7.1 billion during the 12 months to 30 June 2018.
As of 30 June, the combined cash balance of Vodafone Idea stood at €2.3 billion, while debt stood at €13.2 billion. The lion’s share of debt (80 per cent) was owed to the Indian government.
As per the merger terms, Vodafone will own a 45.2 per cent stake in the Vodafone Idea, while Idea Cellular’s parent Aditya Birla Group takes a 26 per cent, and the remaining share will be owned by the public.
Balesh Sharma, previously chief operating officer of Vodafone India, was named CEO of the merged business, while Kumar Mangalam Birla, controlling shareholder of the Aditya Birla Group, will be chairman. Birla described the merger as “truly a historic moment”.
The Jio effect
Vodafone India and Idea Cellular will hope that merging operations will help fend off the threat of Reliance Jio, which has shaken up the Indian market since its entrance in September 2016.
Indeed, Jio continues to go from strength to strength. According to subscriber figures released by the Telecom Regulatory Authority of India earlier this month, the upstart took its subscriber total to 215 million after 9.7 million additions in June, closing in on Vodafone India and Idea Cellular at the time.
The companies were ranked as number 2 and number 3 in the market, respectively, pre-merger.
Then market leader Bharti Airtel, with a total of 345 million subscribers, also felt the heat, after picking up just 11,000 subscribers in June.