It would launch new services soon.
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Adita Birla will then own 26.0% of the business, and will have the right to acquire more shares from Vodafone under an agreed mechanism meant to equalise their shareholding over time.
Vodafone will own 45.1 percent of the combined company after transferring a stake of 4.9 percent to ABG. “As always, Axiata will ensure that the position of its shareholders are best addressed through among others, any industry consolidation or development”, it said in a filing with Bursa Malaysia Securities yesterday. Vodafone shares were down 0.2% in early trading Monday.
Vodafone India will be deconsolidated by Vodafone on announcement and reported as a joint venture postclosing, reducing Vodafone Group net debt by approximately INR552 billion.
Vodafone and Idea are weighing options on excess airwaves-including selling or sharing them, people with knowledge of the matter said last month.
When Jio held its commercial launch on September 5, 2016, investors initially sold off shares of Idea Cellular, Airtel and others on fears the ensuing price war would hurt their profits. But Airtel is also on the cusp of M&A, too.
The importance of spectrum ownership can not be denied.
The ongoing arbitration over a tax dispute regarding Vodafone with the Indian government will have no bearing on the merger with Idea. The firm is deeply involved in a 2.5 billion dollar tax dispute with the tax authorities in the country, over its purchase of the Hutchinson Essar in the year 2007 for 11.2 billion dollars. The matter is now under arbitration overseas under worldwide laws.
However, he also noted that Jio’s strategy had a time limit and that Vodafone/Idea’s new entity would be prepared to compete, saying: “their free data offering is finishing in April, they have to charge, and both Vodafone and Idea have increased data allowances to respond effectively to the newcomer”.
Birla said the fund for picking up 4.9 per cent of Vodafone stake for Rs 3,874 crore will come from the promoters, and not from Idea.
In January, Vodafone confirmed their respective boards were in discussions for an all-share merger following media reports about the deal.
Idea Cellular’s stock prices crashed on Monday. What the deal does for investors in a combined entity with a Rs 80,000-crore revenue is open to question. Shares of Idea Cellular surged as much as 14% in Mumbai.
However, the analysts said that the consolidation in the telecommunication sector, triggered by Jio’s 25 billion dollar (around Rs 1.7 lakh crore) investment, was likely to continue. Vittorio Colao, chief executive of Vodafone, the world’s second-biggest mobile operator by subscribers, has called Mr. Ambani’s promotion “unprecedented” and hard to plan against.
Buzz is already in that the combined entity will start firing in a massive scale, and Chairman of the new entity, KM Birla, has already hinted towards it. There will be three directors from each Aditya Birla Group and Vodafone and six independent directors. See my blog “Idea Cellular Tumbles As Details Of Vodafone Merger Disappoint”.
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The lack of extensive 4G network is a problem for both Vodafone and Idea. Market leader Bharti Airtel Ltd.
