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Idea and Vodafone India Merges to Make India’s Largest Telecom Entity

Idea Cellular has announced its merger with Vodafone India to make the country’s largest telecom network. As per the reports, the merger will be completed in 2018 and forms board of directors from both networks. The final decision on the same was pending and will be unveiled after meeting of top Vodafone executives on March 16.

The statement released states that the Promoters of Vodafone and Idea will have the right to nominate three directors each. The CFO will be a Vodafone’s nominee, and the chairman will be an Idea nominee. Both CEO and COO will be decided jointly by both the parties.

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“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. We look forward to working with the Aditya Birla Group to create value for all stakeholders,” says, Vittorio Colao, Chief Executive Officer at Vodafone Group Plc.

In the combined entity, Vodafone will hold 45 percent and the idea to hold 26 percent after the merge. On the other hand, Idea shares have observed a six-month high share value after its merge with Vodafone India. In a move to equalize the share holding over time, Idea has right to buy up to 9.5 percent additional stake from Vodafone. Voting rights of additional shares will be exercised jointly until the equalization is achieved.

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The pact includes idea to contribute all its assets like 15.4k tenancies standalone towers and 11.15 percent in Indus Towers. Vodafone India will contribute standalone towers with 15.8k tenancies but no stake in Indus Towers. Also, Vodafone will pay a net debt of 25 billion rupees than the idea at completion. Post-closing, combined entity will be reported as a JV by Vodafone and accounted for the same method.

Vodafone Decline in Revenue due to Note ban and Reliance Jio

Reliance Jio creates a hurricane in the telecom sector. Most of the famous telecom companies facing problems with increasing the popularity of Reliance Jio. The British multinational telecommunication company Vodafone is confronted with a decline in its India revenue at Rs 10,556 crore during October-December 2016. Vodafone recorded 4.7 per cent decline in India Revenue.

Demonetization and entry of Reliance Jio may be the reason for the Vodafone decline in India revenue. The Teleco company has reported the revenue of same period a year ago is Rs 11,077.63 crore. Nonetheless, the mentioned decline in euro for the period was 5.5 percent at 1,452 million euro compared to 1,536 million euro during the period under review.

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 Vittorio Colao, Vodafone Group Chief Executive, said that “In AMAP (Africa, Middle East & Asia Pacific), our strong organic performance in South Africa and Turkey was partially offset by India, where the sector is affected by free services from the new entrant.”

He also added that intense competitive pressure is expected in India in the fourth quarter for which Vodafone is taking some serious actions like a series of commercial actions, including the extension of 4G services to 17 circles.

There was an unfavourable impact on prepaid top-up volumes during the quarter because of demonetization, said Vodafone.

“This drove a quarter-on-quarter decline in our active data customer base to 65 million (from 69.6 million in second quarter), mainly reflecting fewer 2G users. Our 3G and 4G customer base declined slightly quarter-on-quarter to 35 million, and smartphone penetration is 35 per cent,” Vodafone said.

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The browsing revenue growth of Vodafone in India is slowed from 16% in second quarter of the current financial year to 0.6% in the third quarter due to the free services from the new entrant.

The average revenue of Vodafone decline per user is 10 percent to Rs 158 in the third quarter ended Dec 31, 2016, from Rs 174 a year ago. Overall the Vodafone revenue declined by 3.9 percent, 13,687 million euros from 14,247 million euros during the period under review.

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