NCLT Confirms Idea-Vodafone Merger

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NCLT Confirms Idea-Vodafone Merger
NCLT Confirms Idea-Vodafone Merger

The National Company Law Tribunal (NCLT) has confirmed the merger of Idea Cellular and the Indian Unit of Vodafone Group.

This fresh collaboration will overtake Bharti Airtel which is India’s largest mobile phone operator.  The Vodafone –Idea merger, confirmed in March 2017, will drop Bharti Airtel and create a giant with 438.8 million subscribers.

Idea is a part of the Aditya Birla Union, and Vodafone signed a merger agreement last year, which could construct the country’s biggest telecom operator. Approval from the Tribunal was the only fabulous regulatory requirement. Both companies declined to comment.

The Department of Telecommunications recently gave its approval to the merger.

Vodafone India and Idea has in March outlined the key leadership team to head the merged entity. Chairman of Aditya Birla Group Kumar Mangalam Birla was named the non-executive chairman of Vodafone Idea Ltd while Balesh Sharma, presently the chief operating officer of Vodafone India, was named the chief executive officer.

Pricing Power May Return to Sector

Sector experts are expecting pricing power to fall gradually to the sector over a time period of the year or so, as the effects of the rapid consolidation play out. Two years of brutal price wars have savaged revenue and profits.

Pricing Power May Return to Sector
Pricing Power May Return to Sector

The NCLT confirmation is the final clearance needed before registration of the merged entity, Vodafone Idea Ltd, which will remain listed. The new board will be constituted after registration with the Registrar of Companies (RoC). Some circle-level executives have been told that September 3 could be Day Zero of the combined entity. Idea’s shares closed marginally higher by 0.71% at Rs 49.85 on the BSE Thursday. Vodafone and Idea didn’t respond to ET’s emailed queries.

The final approval came nearly two months after the June 30 deadline the two companies had set. Vodafone Group CEO Vittorio Colao had said he expected the merger to close in August during a visit to India last month.

Analysts had underlined the importance of an early completion of the merger as both Vodafone India and Idea Cellular have been rapidly losing ground to Mukesh Ambani-controlled Reliance Jio Infocomm.

Jio, which officially launched services in September 2016, has dislodged both the Idea and Vodafone standalone entities on RMS.

Potent Rival

The merged entity should clock as much as $10 billion in savings over time, making it a more potent rival for Bharti Airtel and Jio, according to analysts. “The market and customers will now see how the new company deploys and catches up with its 4G rollout, in which it has been a laggard,” as per ex-Bharti Airtel CEO Sanjay Kapoor.

He said a new telecom leader had emerged and the markets would be watching closely. “The countdown for deliveries has begun and financial synergy is an integral part of this merger,” Kapoor said. Rohan Dhamija, partner and head of India and Middle East at Analysys Mason, said, “The merged entity would need to very quickly change focus from internal integration to winning externally in the market, besides investing significantly in enhancing 4G network capacity to effectively compete with Jio and Airtel.”

Credit Suisse analysts said Idea’s financial pain in the run-up to the merger might be deeper.

What do you think, Vodafone –Idea Unification will snatch the first position from Bharti Airtel or the other rival Jio will come up with a surprise and garb the position?

Let us know in the comment section below.

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