Idea Cellular and Vodafone, Indian unit of British telecom company announced merger today creating India’s largest telecom operator. The companies said, the merger will create India’s largest telecom operator with the widest network.
Vodafone will own 45 percent of the combined entity, and Idea and Vodafone will have the right to nominate three 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.
Promoters of the company will appoint the Chairman. The appointment of CEO (chief executive officer) and COO (chief operating officer) need the approval of both the promoters.
The entry Reliance Jio has spurred a consolidation in the Indian telecom sector. Mukesh Ambani, energy conglomerate Reliance’s industries owner, has intensified competition in India by launching Jio, the world’s second largest mobile market after China.
Bharti Airtel reported its lowest profit in four years in the October-December quarter while No. 3 player Idea Cellular posted its first-ever quarterly loss for the same period. Bharti Airtel has earlier announced this year to buy Norwegian company Telenor’s operation in six Indian states.
Reliance has already signed an agreement to merge its wireless business with Aircel.
“The combined entity’s operating margins will improve by around 3 percentage points due to cost synergies in networking and selling, general and administrative expenses,” the India Ratings, a rating agency, had said in a report.