Vodafone’s India deal with Idea Cellular to exclude global services
Vodafone’s merger of its Indian operations with Idea Cellular will not affect the operations of Vodafone Global Services within the country.
However the merger of the two companies’ retail businesses will create the largest mobile operator in India, with 400 million customers and a market share of over 40%.
Vodafone group CEO Vittorio Colao said: “The combination of Vodafone India and Idea will create a new champion of Digital India founded with a long-term commitment and vision to bring world-class 4G networks to villages, towns and cities across India.”
He confirmed that global services will remain with the UK-based Vodafone Group.
The mobile merger, which will not be completed until 2018, will enable both companies to economise on 4G investment, said Nick Read, the group CFO. Vodafone has already started building LTE in its top 12 markets – or circles – but the two will not be able to collaborate until the deal is complete.
“We were previously only strong in 12 circles,” said Colao in a conference call with Capacity and other media on Monday. The combined company will be in first or second position in the market in 21 out of India’s 22 regions, and will have enough spectrum to provide new 4G services. “We have the depth of spectrum in those circles.”
Vodafone and Idea – which is controlled by the Aditya Birla group, a conglomerate with interests from cement to financial services – will eventually own identical stakes in the combined company, after some adjustments over the first four years after completion.
As well as Vodafone’s enterprise and wholesale services, also excluded from the deal are stakes in Indus Towers, which was set up in 2007 and provides cell towers to Vodafone, Idea and rival operator Bharti Airtel.
The companies say that the implied enterprise value of the combined operation will be is $12.4 billion for Vodafone India and $10.8 billion for Idea excluding its stake in Indus Towers. They say that there will be synergies of $10 billion after integration costs and spectrum liberalisation payments, and run-rate savings of $2.1 billion a year by year four after completion.