Idea Cellular's shares surge following Vodafone merger approval

Aditya Birla group's telecom arm Idea Cellular Ltd. approved the merger of Vodafone India Ltd. and Vodafone Mobile Services Ltd. with itself, in a deal that will create India's largest mobile services operator.

This will bring about the much-needed consolidation in the telecom industry, analysts said.

In the beginning, Vodafone will be a dominant partner in the merged entity with 45.1% stake after it will transfer a stake of 4.9% to the Aditya Birla group for Rs3,874 crore in cash to complete the merger. The Promoters of Idea will hold 26% of the Company and the balance will be held by the public. Promoters of idea will have the right to acquire up to 9.5 per cent additional stake from Vodafone.

Prior to the merger, it was speculated that the combined entity will generate a revenue share of around 40 per cent and a subscriber base of over 380 million, according to India Ratings and Research.

Soni believes the combined Ebitda margin could improve by 250 to 300 basis points as the two companies would save some expenses on the network.

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At present, Vodafone India is the country's second largest operator by users and Idea Cellular the third largest operator.

The spectrum of Vodafone India in seven circles and that of Idea in two, whose permits are expiring in 2021-22, is together valued at around ₹12,000 crore as per the last auction price. Immediately thereafter, and on the amalgamation of Vodafone India Limited, these shares will stand canceled, and Idea will then issue shares equal to 50% of post-issue paid up capital to Vodafone.

- Vodafone would have the right to appoint the CFO.

In a BSE filing Idea said, "The board of directors at its meeting held on March 20, 2017, have approved the scheme of amalgamation of Vodafone India Limited (VIL) and its wholly owned subsidiary Vodafone Mobile Services Limited (VMIL) with the company subject to necessary approvals". The appointments of chief executive and chief operating officers will require approval of the boards of both the companies while Vodafone will have exclusive rights to appoint chief financial officer.

We're updating this post with more details.

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