By Oliver Haill
Date: Monday 20 Mar 2017
(ShareCast News) - Vodafone has agreed terms of a $23bn merger between its Indian business and Idea Cellular, which is part of the Aditya Birla Group.
Vodafone will own 45.1% of what will be India's largest telecoms company, which as a joint venture will reduce its net debt by approximately $8.2bn and is expected add to Vodafone's cash flow from the first full year post completion.
Vodafone will transfer a stake of 4.9% to the Aditya Birla Group for circa INR39bn ($579m) in cash when the merger completes, which will mean Aditya Birla Group will then own 26.0% and has the right to acquire more shares from Vodafone under an agreed mechanism with a view to equalising the shareholdings over time.
The combination has been agreed as a merger of equals, with joint control of the combined company between Vodafone and the Aditya Birla Group, governed by a shareholders' agreement.
Amid the price war that has broken out in the Indian mobile market since a new rival, Jio, launched into the market in September, the merged operation will have the scale to offer attractively priced mobile services, with 400m customers, 35% customer market share and 41% revenue market share.
Vodafone chief executive 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.
"The combined company will have the scale required to ensure sustainable consumer choice in a competitive market and to expand new technologies - such as mobile money services - that have the potential to transform daily life for every Indian. We look forward to working with the Aditya Birla Group to create value for all stakeholders."
Run-rate cost and capex synergies are expected to reach 140bn rupees ($2.1bn) on an annual basis by the fourth full year post-completion, equivalent to a net present value of approximately INR700bn, after integration costs.
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