Yes, Vodafone India, A V Birla’s Idea holding merger parleys

Strategic deal aimed at creating one of world’s largest telecom cos to take on Reliance Jio

NEW DELHI: Britain’s Vodafone Group on Monday said that it is in talks to merge its Indian unit with Idea Cellular in an all-share deal to create the country’s largest telecom operator to compete with Reliance Jio that has unleashed a fierce price war. The merger of Vodafone — the world’s second-largest cellphone network operator — with the Aditya Birla Group firm — India’s third-largest cellular operator would create a company with around 387 million users and form one of the largest telecoms companies in the world.

In a statement, the Ukbased company said it is in talks with Idea about an allshare merger, but the deal under consideration excludes its 42 per cent holding in Indus Towers, a joint venture with Bharti and Idea. “Any merger would be effected through the issue of new shares in Idea to Vodafone and would result in Vodafone de-consolidating Vodafone India,” the company said. “There is no certainty that any transaction will be agreed, nor as to the terms or timing of any transaction.”

Since its entry in India in 2007, Vodafone has become number 2 operator in the coun- try, but its journey has been tumultuous as it is locked in a legal battle with the government over a USD 2 billion retrospective tax claim over its acquisition of Vodafone India from Hutchison in 2007.

It had written down value of business by 5 billion pound (USD 3.35 billion) late last year. The British firm has pumped in more than USD 7 billion into the India unit. Backed by India’s richest man, Reliance Jio Infocomm is offering free voice calls and data till March and has notched up 74 million users. It has already invested over USD 25 billion and is investing another Rs 30,000 crore (USD 4.8 billion).

The Aditya Birla group owns 42.2 per cent of Idea while Malaysian carrier Axiata Group Bhd has a 19.8 per cent stake. Vodafone India Ltd is a wholly-owned unit of Vodafone Group Plc.

Shares of Idea Cellular surged a massive 26 per cent on the bourses on Monday after the global telecom giant Vodafone confirmed that it is in discussion to merge its India mobile business with Aditya Birla group firm. On the BSE, the stock jumped 25.90 per cent to close at Rs 97.95. During the day, it gained 29.2 per cent to Rs 100.50. The scrip settled at Rs 98, up 25.64 per cent on NSE.

Following the rally, the market capitalisation of Idea Cellular rose by Rs 7,257.41 crore to Rs 35,278.55 crore. On the volume front, 1.53 crore shares were traded on BSE while 15.48 crore scrips changed hands on NSE. Rival Bharti Airtel ended the day on BSE at Rs 347.65, up 7.48 per cent. On NSE, it settled the day up 7 per cent at Rs 346.40. In a BSE filing, Idea Cellular said it constantly evaluates various opportunities to enhance stakeholders’ value.

“As part of the exercise, the company has been in preliminary discussions with Vodafone,” it said. Idea emphasised that the fundamental premise of preliminary discussion is based on “equal rights” between the Aditya Birla group and Vodafone in the combined entity. “In view of the fact that the discussion is at preliminary stage, the company is not in a position to share any further details... Further, there is no certainty that the discussion with them will result in any agreement,” the company said.

“Vodafone confirms that it is in discussions with the Aditya Birla group about an all-share merger of Vodafone India (excluding Vodafone’s 42 per cent stake in Indus Towers) and Idea,” Vodafone said in a statement. Any merger will be effected through issuance of new shares in Idea to Vodafone and would result in de-consolidation of Vodafone India, it added. Among secondary barometers, the BSE MidCap index provisionally rose 0.28 per cent, outperforming the Sensex. The BSE Small-cap index provisionally fell 0.32 per cent. The fall in this index was lower than Sensex’s decline in percentage terms

Of the 30-share Sensex pack, 19 scrips ended lower while 11 firmed up. Major lossers were Tata Motors 2.18 per cent, Tata Steel 1.56 per cent, ONGC 1.42 per cent, SBI 1.31 per cent, Hero Motoco 1.11 per cent, NTPC 0.96 per cent, Bajaj Auto 0.96 per cent, TCS 0.89 per cent, Coal India 0.65 per cent and HDFC Bank 0.63 per cent.

However, Bharti Artel rose by 7.48 per cent followed by Reliance 1.85 per cent, Sun Pharma 0.81 per cent, Asian Paints 0.71 per cent and Infy 0.66 per cent. Among BSE sectoral and industry indices, auto fell by 0.88 per cent, followed by bankex 0.76 per cent, power 0.58 per cent, consumer durables 0.48 per cent, industrials 0.46 per cent, finance 0.41 per cent and oil&gas 0.39 per cent.