Vodafone-Idea merger: Kumar Mangalam Birla, Vittorio Colao meet telecom minister to discuss the deal

New Delhi: Aditya Birla Group Chairman Kumar Mangalam Birla and Vodafone Group CEO Vittorio Colao met with Telecom Minister Manoj Sinha today to discuss the contours of the Vodafone-Idea merger deal.

The two top honchos, flanked by senior executives from both companies, called on the minister to discuss the details of the mega alliance, in a meeting that lasted half an hour. Vodafone India and Idea Cellular on Monday agreed to merge their operations to create the country’s largest telecom operator worth more than US $23 billion with a 35 percent market share.

The combined entity of Vodafone and Idea Cellular, which are currently India’s number 2 and 3, respectively, will dislodge Bharti Airtel to counter the fierce price war in the world’s second-largest market.

Emerging from the meeting, both Birla and Colao declined to share details of the discussions or take specific queries. The two companies announced yesterday that the British firm will own 45.1 percent of the merged entity while the Aditya Birla group, Idea’s parent company, will own 26 percent after paying Rs 3,874 crore cash for a 4.9 percent stake.

The remaining 28.9 percent will be held by other shareholders.

The new company, which will come into being over the next two years, will be headed by Birla while Vodafone will have the right to appoint chief financial officer.

The CEO and the chief operating officer will be appointed with approval of both companies. The two firms will have three nominees each on the board of the new entity.

Aditya Birla and Vodafone eventually aim to own an equal share in the joint venture.

The merged venture will create India’s largest mobile operator with almost 400 million users and a 35 percent market share by customers. The deal gives Vodafone India an implied enterprise value of Rs 82,800 crore and Idea an enterprise value of Rs 72,200 crore.

The telecom analysts have been flagging certain hurdles in the deal, including breach of revenue market share, subscriber and spectrum caps in five markets.

This is the second merger in the sector in as many months. Last month, Bharti Airtel announced plans to buy the Indian business of the Norway-based Telenor.