Telecom minister Manoj Sinha. Photo: HT
Telecom minister Manoj Sinha. Photo: HT

Vodafone-Idea merger a go, just formalities pending: Manoj Sinha

The combined operations of Idea Cellular and Vodafone India will create the country's largest telecom operator worth over $23 billion

New Delhi: Telecom minister Manoj Sinha said on Wednesday that the government has approved the Vodafone-Idea merger, the sector’s biggest, but the companies need to complete some formalities for the final closure of the deal. “We have already approved the Vodafone-Idea merger. There are some formalities which are pending that they have to complete for it (the merger)," Sinha told reporters on sidelines of a BSNL event—the first on-record confirmation from the government side.

The top management of Vodafone Group Plc, the British telecom firm, met the minister on Tuesday after the deal was given conditional approval by the Department of Telecommunications on 9 July. “They met me and to thanked us that we have done it very quickly," Sinha said.

Vodafone CEO-designate and chief financial officer Nick Read, after meeting Sinha, had on Tuesday confirmed receiving the letter approving the merger. “We are happy to receive the letter," he had said. There have been industry speculations that Idea Cellular and Vodafone may challenge in court the demand of 3,976 crore for one-time spectrum charge of Vodafone India, and joint bank guarantee of 3,342 crore sought by DoT before it grants final approval for the merger.

Vodafone executives did not respond to queries over their plans to make payment and furnishing bank guarantee. Vodafone CEO Vittorio Colao, who will remain in office till October, said he was optimistic that the new entity, to be named Vodafone Idea Ltd, will be in place before he remits office.

“When asked for plans of the British telecom firm post the new entity comes in place, Read said: “We have always been a strong investor in India. We will remain that."

The combined operations of Idea and Vodafone will create the country’s largest telecom operator worth over $23 billion (or over 1.5 lakh crore), with a 35% market share and a subscriber base of around 430 million.

Debt-ridden firms Idea and Vodafone India are in the 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.

Vodafone Idea will have the capacity to provide 4G spectrum in all telecom circles of the country. According to a presentation by Idea, 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. With the new entity coming in force, Bharti Airtel will lose the tag of India’s biggest telecom service provider to the new entity.

The combined debt of both the companies is estimated to be around 1.15 lakh crore. Vodafone will own 45.1% stake in the combined entity, while the Kumar Mangalam Birla-led Aditya Birla Group will hold 26% and Idea, 28.9%. The Aditya Birla Group has the right to acquire up to 9.5% additional stake from Vodafone under an agreed mechanism with a view to equalising the shareholding over time.

Balesh Sharma will be the new CEO of the merged entity. Idea’s chief financial officer Akshaya Moondra will head the financial operations of the new entity as its CFO. Ambrish Jain, currently deputy managing director at Idea Cellular, is set to become the new chief operating officer.

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