India's Idea Cellular Ltd and Vodafone India Ltd have approved a merger excluding the latter's 42 per cent stake in Indus Towers Ltd, creating the country's largest telecom company with a total revenue of over £8 billion.
Vodafone will be the dominant partner in the merged entity with 45.1 per cent stake, in the beginning, after it transfers a stake of 4.9 per cent to the Aditya Birla group for £387.4 million in cash to complete the merger. Aditya Birla group will then own 26 per cent stake in the company but it will have the right to acquire more shares from Vodafone under an agreed mechanism with a view to equalise the shareholding over time.
"The promoters of Idea have the right to acquire up to a 9.5 per cent additional stake in from Vodafone... if Vodafone and the promoters of Idea do not have equal shareholding by the expiry of the fourth year from the completion of amalgamation, Vodafone is obliged to reduce its holding in order to equalise its ownership with that of the promoters over the following five years," Idea Cellular said in a statement. Promoters of the company have the sole right to appoint the chairman.
Kumar Mangalam Birla, Aditya Birla Group chairman, will be the chairman of the merged entity. He said, "This landmark combination will enable the Aditya Birla group to create a high quality digital infrastructure that will transition the Indian population towards a digital lifestyle and make the government's Digital India vision a reality. For Idea shareholders and lenders who have supported us thus far, this transaction is highly accretive, and Idea and Vodafone will together create a very valuable company given our complementary strengths."
The combined company would become the leading communications provider in India with at least 400 million customers, 35 per cent customer market share, and 41 per cent revenue market share.
