New Delhi: New Chairman Kumar Mangalam Birla rules out any major downsizing at Idea Cellular after one of the leading players in India's Telecom market on Monday announced its merger with Britain's Vodfaone to become the country's biggest telecom operator.
"I am pleased and honoured to be the Chairman of the new company", Kumar Mangalam Birla said on Monday after Vodafone India-IDEA merger.
The move is seen to counter the entry of Reliance Jio in the telecome sector. Reliance Jio banged into India's mobilephone sector with freebies and 4G internet service.
According to Reuters, Britain's Vodafone Group and Idea Cellular agreed on Monday to merge their Indian operations to create the country's biggest telecoms business in a bid to contest a brutal price war sparked by Reliance Jio Infocomm.
The combined Vodafone-Idea group would have almost 400 million customers, or 35 percent market share, with an implied enterprise value of 828 billion rupees ($12.66 billion) for Vodafone and 722 billion rupees for Idea.
"The combined entity will become the leading challenger with the scale to compete more effectively," Idea said in the statement.
The board of directors of Idea Cellular at its meeting held today approved the "scheme of amalgamation of Vodafone India Limited (VIL) and its wholly owned subsidiary Vodafone Mobile Services Limited (VMSL) with the company", Idea said in a regulatory filing.
Jio has made an impact with free voice calls and cut-price data services, forcing India's three biggest operators - Bharti Airtel (BRTI.NS), Vodafone and Idea - to slash prices and accept lower profits.
"Consolidation is a much anticipated and very welcome development in this beleaguered telecom sector," said Arpita Pal Agrawal, a partner and telecom analyst at PwC India.
"It will help bring in operational efficiencies and improved quality of service to customers."
Vodafone has endured a tumultuous ride since it entered India in 2007, with fierce competition and a high-profile tax battle making a business contributing more than 10 percent of its revenues and profits its most unpredictable by far.
Shares in Idea rose as much as 14.25 percent immediately after the news but reversed course to fall as much as 14.6 percent, as traders expressed concerns about how the merged entity would value Idea's stake.
According to an earlier report by brokerage firm CLSA, the merged entity will have revenues of over Rs 80,000 crore.
The combined entity will have 43 percent revenue market share and a 40 percent active subscriber base. The behemoth will account for over 25 percent of allocated spectrum and will have to sell about 1 percent to comply with spectrum cap norms.
It will be an all-share merger of Vodafone India (excluding Vodafone's 42 percent stake in Indus Towers) and Idea. The merger will be effected through the issue of new shares in Idea to Vodafone and would result in Vodafone deconsolidating Vodafone India.
Vodafone, the world's second-largest cellphone operator, has endured a tumultuous ride since it entered India in 2007, with fierce competition and a high-profile tax battle. Shares in Idea rose as much as 14.25 per cent immediately after the merger news announcement but later gave up all the gains.