£18bn merger to make In­dian mo­bile gi­ant

Daily Mail - - City & Finance - by Sabah Med­dings

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.

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