Vodafone Group will merge its Indian unit with rival Idea Cellular by 2018, Idea said on Monday.
The boards of Vodafone India, the country’s second largest operator and Idea Cellular, the third largest, have okayed the merger.
Vodafone will own 45.1 percent of combined company after transferring around 4.9 percent to Idea founders for Rs 3,874 crore in cash concurrent with merger, Bloomberg reported quoting the company’s press release.
Idea founders will hold 26 percent of the combined company and balance will be with the public. The deal is subject to necessary approvals.
The entry of Mukesh Ambani’s Reliance Jio’s has shaken up the telecom sector, and speeded up mergers and acquisitions in India, the world’s second largest mobile market.
The merger will create India's largest telecom operator with widest network in the country and pan-India 3G/4G footprint, the companies said in a statement.
Shares of the country third largest telecom operator jumped as much as 14.5 percent after it approved a merging Vodafone India and Vodafone Mobile services with itself.
Vodafone will own 45 per cent of the combined entity and Idea and Vodafone will have the right to nominate 3 directors each. The deal excludes Vodafone's 42 per cent stake in tower company Indus Towers. The combined entity will have 40 crore customers or nearly one in three customers in India.
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Promoters of Idea will have the sole right to appoint chairman. The appointment of chief executive officer and chief operating officer need the approval of both the promoters.
Reliance Communications has already entered into an agreement to merge its wireless business with rival Aircel.
LiveMint reported that there could good news for Airtel when Vodafone India and Aircel merge.
According to Mint: "The merged entity will exceed the 50% subscriber and revenue market limit in at least six licence areas and will have to cede share to rivals such as Bharti Airtel to secure regulatory approval, analysts said".
