Britain’s Vodafone Group will merge its Indian subsidiary with local rival Idea Cellular within two years, Idea said on Monday, creating a new market leader better able to contest a brutal new price war.
Vodafone will own 45.1% of the merged entity, after it transfers about 4.9% to promoters of Idea and/or their affiliates for Rs 38.74 billion ($592.15 million) in cash, Idea said.
The combined Vodafone-Idea group would India’s largest telecom operation with almost 400 million customers, or 35% market share.
The merger comes after India’s mobile industry was thrown into turmoil with the launch last year of Reliance Jio Infocomm, the new 4G mobile broadband network built at a cost of more than $20 billion by India’s richest businessman, Mukesh Ambani, as part of his Reliance Industries conglomerate.
Jio has made an impact with free voice calls and cut-price data services, forcing India’s three biggest operators – Bharti Airtel, Vodafone and Idea – to slash prices and accept lower profits.
Idea said the companies expected cost and capex synergies of about $10 billion in net present value after integration costs and spectrum payments.
Idea will have the sole right to appoint the chairman, while Vodafone will appoint the chief financial officer, it said.