Business & Finance

Vodafone-Idea merger: Telecom department to get approval

The telecom department is most likely to approve the merger of Vodafone India and Idea Cellular on Monday that could possibly create the country’s largest mobile service operator with the proposed name of Vodafone Idea Ltd.

“DoT (Department of Telecom) is expected to clear the Vodafone-Idea merger on Monday. The certificate will be handed to them,” an official source said on Sunday.

The merger is said to create India’s largest telecom firm worth over $23 billion with a 35 per cent market share and a subscriber base of about 430 million. This merger is expected to intensify the telecom battle which is currently dominated by Reliance Jio and Bharti Airtel.

Vodafone is expected to own 45.1 per cent, 26 per cent by Aditya Birla Group and Idea shareholders will own 28.9 in the combined entity. The merged entity will have around 43 crore mobile subscribers from Day 1 which translates to about 35 per cent of the market share.

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

The combined debt of both the companies is estimated to be around Rs 1.15 lakh crore.

The Department of Telecom (DoT) will seek a bank guarantee of around Rs 2,100 crore pertaining to one-time spectrum fee of Idea Cellular and undertaking that the resultant will clear dues pertaining to one-time spectrum fee and other sub-judice matter in accordance with the court’s order.

Idea will be asked to replace one-year bank guarantee of Vodafone India submitted for deferred spectrum payment.

Vodafone and Idea will have to give an undertaking of clearing dues that are sub-judice as per the decision of the courts, the official source said.

Idea will hold an extraordinary general meeting on June 26 to change its name to Vodafone Idea Limited following the completion of the merger.

In March this year, Kumar Mangalam Birla was named the non-executive chairman of the prospective combine. Balesh Sharma, currently the chief operating officer of Vodafone India, has been named as the CEO of the new entity. Idea’s chief financial officer Akshaya Moondra will head the financial operations of the new entity as its CFO.

Shares of Idea Cellular were up nearly 3 per cent at Rs 62.30 on the BSE at 10.48 am on Monday. The broader market was trading flat.

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