Vodafone announces tie-up with Indian operator Idea Cellular

The move creates India's biggest operator
The move creates India's biggest operator

Vodafone has announced the merger of its Indian business with rival mobile operator Idea Cellular to create one of the world’s largest telecoms operators.

The announcement ends months of speculation over a possible tie-up.

The combined company will have an enterprise value of around £19bn and be the biggest telecoms operator in India with almost 400m customers and a market share of 35pc.

The deal, which means that Vodafone has gone into business with the powerful Birla dynasty, has been triggered by a mobile price war that was kickstarted by India’s richest man, Mukesh Ambani, and his new operator Reliance Jio.

Commuters are reflected on an advertisement of Reliance Industries' Jio telecoms unit Credit: REUTERS

Following the merger, which is expected to close in 2018, Vodafone will own 45.1pc of the combined company, while the Aditya Birla Group will own 26pc.

The Aditya Birla Group, which is Idea’s parent company, has the right to acquire more shares from Vodafone “with a view to equalising the shareholdings over time,” the companies said.

Vittorio Colao, Vodafone’s chief executive, added: “The combination of Vodafone India and Idea will create a new champion of Digital India founded with a long-term commitment and vision to bring world-class 4G networks to villages, towns and cities across India.

“The combined company will have the scale required to ensure sustainable consumer choice in a competitive market and to expand new technologies - such as mobile money services - that have the potential to transform daily life for every Indian.”

Vittorio Colao, Vodafone's chief executive Credit: Jason Alden/Bloomberg

The companies said they expect cost and capex synergies of about £8bn after integration costs, with operating cost savings representing 60pc of the expected savings.

The Aditya Birla Group has the sole right to appoint the company’s chairman, which will be Kumar Mangalam Birla, the group’s chairman. Vodafone will appoint the chief financial officer, while the two groups will jointly agree on the appointments of the chief executive and the COO.

Shares in Idea rose almost 15pc immediately after the announcement of the news but quickly reversed, plummeting back down by around 15pc.