Vodafone Group plc (LON:VOD) or Vodafone Group Plc (ADR) (NASDAQ:VOD) has been driven to merge its Indian subsidiary with domestic rival, Idea Cellular Ltd., due to hectic competitions. The landscape for mobile operators, especially the 4G segment, has changed drastically after Reliance Industries Ltd. launched its Reliance Jio services for free for first three months and then at much cheaper cost.
According to a Reuters report, Idea disclosed that the integration process would happen within the two-year period. The combination would establish a fresh market letter so that it could compete better with Reliance Jio that unleashed a fresh price war. After the mighty Reliance Industries came out with its pricing of 4G data services with free voice call services, other operators like Vodafone and Airtel have no alternatives but to make more or less similar package to retain subscribers.
The report indicated that British firm would have a stake of 45.1 percent in the merged entity after the company transfers about 4.9 percent to Idea promoters and their affiliates for $592.15 million cash. The merged entity is expected to have nearly 400 million customers representing about 35 percent market share.
Idea indicated that the merged entities would save cost, as well as, capex synergies of approximately $10 billion under present value after spectrum payments and integration expenses. According to the merger agreement, Idea would have the right to name the chairman whereas Vodafone has been accorded with the right to name the CFO.
As far as the appointments of CEO and COO, both the companies should approve the choice. Vodafone entered the Indian telecom market in 2007 by acquiring stake from Hutchison.