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DoT gives conditional green signal to the Vodafone Idea merger

Vodafone Idea Ltd will have 37.5% revenue market share and 39% customer market share

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MUMBAI: The Department of Telecommunications (DoT) has conditionally approved the merger of Vodafone India with Idea Cellular, the largest M&A deal in the sector, which will displace Bharti Airtel from the top spot after over 15 years. 

The merger is expected to give a breather to both the debt-ridden firms, from cut-throat competition in the market where margins have hit rock bottom with free voice calls.

“DoT has cleared the Vodafone-Idea merger today. They will have to meet conditions for final approval,” a source told the Press Trust of India, as per a report. The department has asked Idea Cellular to pay Rs 3926 crore in cash for Vodafone spectrum and furnish a bank guarantee of Rs 3342 crore, the source added.

DoT’s conditions have been fortified after two rounds of legal opinion. The merger will result in a new entity, Vodafone Idea Ltd, which is expected to be better placed to take on competition from Reliance Jio Infocomm and Bharti Airtel. On their own, Idea and Vodafone have struggled to take on Jio and Airtel, widening their losses and losing revenue and subscriber market share. 

Together, Vodafone Idea Ltd will have 37.5 per cent revenue market share and 39 per cent customer market share, or about 440 million subscribers, making it a stronger entity.

The Aditya Birla Group has the right to acquire up to a 9.5 per cent additional stake from Vodafone under an agreed mechanism with a view to equalising the shareholdings over time. Birla is proposed to be the non-executive chairman of the merged entity and Balesh Sharma as the new CEO. Idea's chief financial officer Akshaya Moondra will head the financial operations of the new entity as its CFO. Ambrish Jain, currently the deputy MD at Idea Cellular, is set to become the new chief operating officer.

Vodafone will own 45.1 stakes in the combined entity, while Kumar Mangalam Birla-led Aditya Birla Group would have 26 per cent and Idea shareholders 28.9 per cent.

Vodafone Idea Ltd will be capable of building substantial mobile data capacity, utilising the largest broadband spectrum portfolio with 34 blocks of 3G spectrum and 129 blocks 4G carriers across the country.

Idea and Vodafone are separately paying rental for 6,300 mobile sites which will be synced for the merged entity in two years.

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