Savings from Idea-Vodafone deal to cross $10 bn: Aditya Birla Group
Aditya Birla Group expects savings from the merger between group company Idea Cellular Ltd and Vodafone Group Plc’s India unit to be significantly more than the $10 billion it forecast in March last year, group chief financial officer Sushil Agarwal said in an interview.
The benefits accruing out of the merger will increase on account of savings made by both Idea and Vodafone India Ltd, because of synergies in capital and operating expenditure, as the group now expects the merger to be completed much before the original deadline of September 2018.
Mint on January 15 had reported that Idea-Vodafone will start functioning as a single entity from April.
The group also expects pricing pressure to moderate soon.
“Given the large synergies that we had announced, we had indicated that there would be $10 billion savings which will come and since the merger is likely to consummated ahead of what we had announced... as of now it looks like we will be ahead of the original time line... so that $10 billion will become a larger number. That’s a large sum for any company,” Agarwal said.
The merger was earlier expected to be completed by the first half of calendar year 2018.
Both Vodafone and Idea have received approval from the National Company Law Tribunal (NCLT), Competition Commission of India (CCI) and Securities and Exchange Board of India (Sebi) and now await the final nod from the department of telecom (DoT) for the proposed merger.
Agarwal expects DoT approval to come soon.
“Post merger, there is a lot of complementary positions that we have between us and Vodafone. There would be some opex saving. There would be some capex saving—depending upon which item you pick up. A few things will start getting reflected immediately,” he said.
That would be good news for Agarwal as well as the Mumbaibased conglomerate whose other companies such as Grasim Ltd have taken a hit on account of losses made by Idea Cellular Ltd.
For instance, Grasim factored in a loss of ₹359 crore in its December quarter earnings on Wednesday, following from its 28% stake in Idea and treating the company as its associate. Idea Cellular’s loss tripled to ₹1,285 crore during the quarter ended December 31 from ₹384 crore in the year-ago period.
“Over a period of time, if you would have noticed, the prices have been improving from the new competitor also. Serious consolidation has taken place, which is the most important piece. Given the merger which is round the corner, ... (we will) become the largest mobile company in the country. In this background, with the sector improving, I am sure all these numbers will be behind us,” Agarwal said.
To compete better with rival operators, Vodafone India and Idea Cellular announced a merger in March.