Debt-ridden firms Idea and Vodafone India are in process of merging their businesses in India as it is expected to bring down cost of their operations and give them relief from cut-throat competition in the market where margins have hit rock bottom with free voice calls. The two companies decided to merge their business after the sector witnessed a huge tariff war and reduction in margins with entry of new telecom operator Reliance Jio, and their merger is conditionally approved by the Department of Telecommunications.
Vodafone Idea will have the capacity to provide 4G spectrum in all telecom circles of the country. The combined 4G spectrum of both the companies is capable of offering up to 450 megabit per second broadband speed on mobile phones in 12 telecom areas in the country. Vodafone will own 45.1 per cent stake in the combined entity, while Kumar Mangalam Birla-led Aditya Birla Group will hold 26 per cent and Idea, 28.9 per cent. The Aditya Birla Group has the right to acquire up to 9.5 per cent additional stake from Vodafone under an agreed mechanism with a view to equalising the shareholding over time.
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.