Facing the heat from Mukesh Ambani’s Jio, Kumar Mangalam Birla’s Idea Cellular will merge its India operations with the world’s No. 2 operator, Vodafone, over the next two years in a deal that will create India’s biggest cellular operator with 367 million subscribers and 36 per cent market share.
The battle in the Telecom Sector has begun. In one of the biggest mergers in the sector, Kumar Mangalam Birla’s Idea Cellular has finally decided to merge with the world’s No. 2 telecom company Vodafone.
This merger will create India’s largest cellular operator with 367 million subscribers and 36 per cent share of the market.
The merger of Idea’s India operation will happen over the next two years.
The merger will impact jobs at Idea Cellular. The fate of many employees, especially at the senior level employees, will surely be badly hit.
According to the terms of merger, Vodafone will own 45.1 per cent of the merged entity, after it transfers about 5 per cent to promoters of Idea and their affiliates for Rs 3874 crore in cash. Idea will own 26 per cent of the merged company.
Chairman of the Aditya Birla Group, Kumar Mangalam Birla said in a release that “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.”
Vittoria Colao, CEO of Vodafone PLC, said: “The combined company will have the scale required to ensure sustainable consumer choice in a competitive market and to expand new technologies—such as mobile money services—that have the potential to transform daily life for every Indian .”
The merger seems to have been prompted by growing competition in the industry, where the arrival of Reliance Jio with its 4G, data-driven service at low rates has affected tariffs of other operators.
Until this merger, Bharti Airtel was the biggest player, followed by Vodafone and Idea. But Reliance Jio was able to garner 100 million users within a few months of formally launching its service, which was free for almost six months.
Other smaller players like Reliance Communications, Aircel and Telenor are also considering a merger to remain competitive in the telecoms market.