Vodafone and Idea meger will create India’s largest telecom firm

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  • The U.K.’s Vodafone and Aditya Birla group firm Idea Cellular are likely to finalise within a month the mega merger deal that will create India’s largest telecom firm.

  • The companies are likely to announce a definitive signing agreement by February 24-25.

  • The British telecom major has brought its ex-India unit chief Marten Pieters to work on the proposed merger.

  • If the deal is successful, the combined entity will create India’s largest telecom firm with a revenue share of around 40% and a subscriber base of over 380 million, according to India Ratings and Research.

  • The proposed merger of Vodafone India and Idea will create an entity with a revenue of around Rs. 77,500-80,000 crore besides eliminating duplication of spectrum and infrastructure capex, the rating agency said in its report.

  • Further, the spectrum of Vodafone India in seven circles and that of Idea in two, whose permits are expiring in 2021-22, is together valued at around Rs. 12,000 crore as per the last auction price.

  • These permits are not in common circles, and hence there could be potential spectrum capex synergies between the two companies.

  • According to the merger and acquisition rules, an entity should not hold more than 25% spectrum allocated in a telecom circle and 50% on spectrum allocated in a particular band in a service area.

  • The merged entity should also not have more than 50% revenue and subscriber market share. As per CLSA report, the merged entity would breach revenue market share, subscriber and spectrum caps in five markets.

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