The board of the Aditya Birla-backed Idea Cellular has approved its merger application with Vodafone India and Vodafone Mobile Services, according to a notification to the BSE.
The merger, when it comes though, will mark the first consolidation amongst the existing players after the Mukesh Ambani-backed Reliance Jio's entry into the telecom market in September last year.
Subject to the necessary approvals, Vodafone said it expects the merger to be completed in 2018.
Vodafone India and Vodafone Mobile Services have a combined turnover of about Rs.454 billion while Idea has a turnover of about Rs.360 billion.
In the merged entity, Vodafone will own 45.1% of the company, transferring a stake of approximately 4.9% to the promoters of Idea and/ or their affiliates for Rs 38.74 billion in cash. Idea's promoters will hold 26% of the company while the balance will be held by the public.
FEATURES OF THE MERGED ENTITY
The merger will ensure the "creation of the largest Indian telecom operator with the widest mobile network in the country and pan India 3G/ 4G footprint;" it will ensure "sufficient spectrum to compete with major operators while offering innovative and attractively priced mobile services; acceleration of expansion of wireless broadband networks across India, substantial cost and capex synergies, and leveraging the customer's affinity for both the existing brands."
- The promoters of both - Idea Cellular and Vodafone India - would have the right to nominate three directors each. The board will also consist of independent directors.
- Idea's promoters would have the sold right to appoint the Chairman while the appointment of the CEO and the COO will need a nod from the promoters of both the companies.
- Vodafone would have the right to appoint the CFO.
- Decisions like shares issue, consolidation, liquidation, entry into related party transactions, change to the name or key brands or branding strategy would need a nod from the promoters of both the companies.
- If Vodafone and the Aditya Birla Group's shareholdings in the combined company are not equal after four years, Vodafone will sell down shares in the combined company to equalise its shareholding to that of the Aditya Birla Group over the following five-year period.