The rivals in the telecom industry, Vodafone and Idea are all set to merge sometime in the next two years, said Idea telecom on Monday. This is an attempt to create a new market leader, which will be able to compete in the new price war.
Vodafone, after transferring 4.9% to the Idea promoters, will own 45.1% of the merged entity. This 4.9 % will be transferred to affiliated in cash, which amounts to Rs. 38.74 billion ($592.15 million), according to Idea. This combined telecom network will become the Country’s largest operation with 400 million customers and also own 35% of the market.
This merger was a result of the Reliance Jio Infocomm, which launched last year and was built at more than $20 billion by the richest businessman of India, Mukesh Ambani. The telecom was a part of Reliance Industries conglomerate. The free voice calls, lower data prices, and other offers have forced the telecom companies Airtel, Vodafone and Idea to slash their prices accordingly.
Idea said, after spectrum payments and integration costs, the companies expected cost and CapEx synergies is about $10 billion in net present value. For the merged company, Idea will have all the rights to appoint a chairman and Vodafone will get to appoint the Chief Financial Officer.
Though the decision rests in one company’s hand, both the companies have to give their approval for the appointment which will have the right to nominate three board members each. As soon as the news of a merger came out, the shares of Idea rose almost as much as 14.25% immediately and gave up gains to be trading up 3.2% in the market.
