£18bn merger to make Indian mobile giant
VODAFONE has struck an £18bn deal to merge its Indian operations with a local rival to become the country’s largest mobile operator.
The UK-listed telecoms firm is joining forces with Idea Cellular in a tieup that will create a giant responsible for more than 400m customers.
There has been a six-month battle in the Indian market to hold on to users after a new operator started offering free calls and data.
Mukesh Ambani, India’s richest man, announced in September that services on his Jio network would be available for free until the end of the year, in a ‘welcome’ offer. It was later extended until April 1, with the billionaire pumping more than £16.2bn into a promotional offer aimed at blowing competitors out of the market.
Vodafone was forced to write- off £4.3bn last year as a result of having to slash its own tariffs to hold on to customers. And the billionaire’s wild promotions also scuppered Vodafone’s desire to spin off its Indian arm in a stock market listing.
In January, Vodafone and the Aditya Birla Group – which owns Idea – confirmed they were in talks about an allshare merger, and yesterday announced a proposed tie-up.
Vittorio Colao, Vodafone chief executive, said it was a ‘transformational’ tie-up and would save £1.7bn per year by 2022, four years after the deal completes.
It means the two companies won’t have to shoulder the burden of rolling out 4G services across the whole country, which is 13 times bigger than the UK. Colao, 55, said: ‘This improves the industry structure and it also equips us and Idea to be much more competitive in the future.
‘I have no doubt that the Indian market will remain competitive but nothing can be free for ever and we will be in a better position.
‘The free data is finished at the end of March. Anybody who gives anything for free in life sooner or later has to charge, one way or the other. That will happen in April and we have already increased our data allowance significantly.’
Vodafone will own 45.1pc of the combined company after transferring a stake of 4.9pc to the Aditya Birla Group which will then own 26pc – with the two stakes aimed to equalise after four years.
Other shareholders will own the remaining 28.9pc.
Vodafone will cut its net debt by about £6.6bn in the deal, which will create a company four times the size of its rival in the market, Reliance Jio.
The Aditya Birla Group has the right to choose the company’s chairman, who will be Kumar Mangalam Birla.
Vodafone will appoint the chief financial officer, while the two groups will jointly agree on the appointments of chief executive and chief operating officer.
Neil Wilson, market analyst at ETX Capital, said: ‘It is a sensible move by Vodafone as it just doesn’t have the appetite to fight a long and bitter price war on its own.’
Vodafone shares closed down 0.4pc, or 0.9p, at 210.5p.