What you need to know about Vodafone Idea merger


Vodafone, one the largest telecom provider has finally given details about its proposed merger with India’s Idea Telecom.

The proposed merger is expected create the largest telecoms operator in India.

The company said in an emails statement that its subsidiary Vodafone India (excluding its 42% stake in Indus Towers) with Idea.

Idea is currently listed on the Indian Stock Exchanges.

See below details of the merger:

    • Highly complementary combination will create India’s largest telecoms operator1 with the country’s widest
      mobile network and a strong commitment to deliver the Indian government’s ‘Digital India’ vision.
    • Sustained investment by the combined entity will accelerate the pan-India expansion of wireless broadband
      services using 4G/4G+/5G technologies, support the introduction of digital content and ‘Internet of Things’
      (IoT) services as well as expand financial inclusion through mobile money services for the benefit of Indian
      consumers, businesses and society as a whole.
    • Merger of equals with joint control of the combined company between Vodafone and the Aditya Birla Group,
      governed by a shareholders’ agreement.
    • The merger ratio is consistent with recommendations from the joint independent valuers. The implied
      enterprise value is INR828 billion (US$12.4 billion) for Vodafone India and INR722 billion (US$10.8 billion)
      for Idea excluding its stake in Indus Towers, valuing Vodafone India at 6.4x EV/LTM EBITDA and Idea
      excluding its stake in Indus Towers at 6.3x EV/LTM EBITDA.
    • Substantial cost and capex synergies with an estimated net present value of approximately INR670 billion
      (US$10.0 billion) after integration costs and spectrum liberalisation payments, with estimated run-rate
      savings of INR140 billion (US$2.1 billion) on an annual basis by the fourth full year post completion3
    • Vodafone will own 45.1% of the combined company after transferring a stake of 4.9% to the Aditya Birla
      Group for circa INR39 billion (circa US$579 million) in cash concurrent with completion of the merger. The
      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.
    • If Vodafone and the Aditya Birla Group’s shareholdings in the combined company are not equal after four
      years, Vodafone will sell down shares in the combined company to equalise its shareholding to that of the
      Aditya Birla Group over the following five-year period.
    • Until equalisation is achieved, the voting rights of the additional shares held by Vodafone will be restricted
      and votes will be exercised jointly under the terms of the shareholders’ agreement.
    • Vodafone India will be deconsolidated by Vodafone on announcement and reported as a joint venture postclosing,
      reducing Vodafone Group net debt by approximately INR552 billion (US$8.2 billion) and lowering
    • Vodafone Group leverage by around 0.3x Net Debt/EBITDA4

Vodafone said the transaction will be concluded in 2018.

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