The Department Of Telecommunications of India approved 100% foreign direct investment (FDI), laying the ground work for the merger of Idea Cellular with Vodafone India. This move is set to create India’s largest telecommunications company in terms of number of customers and market share.
The new company thus formed, Vodafone India Ltd, will have nearly 42% of the customer market share and 37% of the revenue market share. The largest players in the Indian telecommunications sector are Bharti Airtel and Reliance Jio. The merger will pit the three telecom operators as rivals in what is possibly one of the world’s largest markets for cell phone users. With the second largest population in the world, India is a coveted market for many global industries.
The Indian Department of Telecommunications is however, expected to issue demands for the two companies to clear their combined dues owed to the government. This, among other charges includes the one-time spectrum charge, pegged at about Rs 5700 crore ($860 million approximately). Other outstanding dues include the license fee and spectrum usage charges.
The merger, which might be finalized within this month, is expected to create a telecommunications entity with revenues that top Rs 63,000 crore ($9.5 billion approximately) and have a subscriber base that consists of over 430 million users.
In the newly formed company Vodafone would own 45.1% of the shares, while Aditya Birla Group, Idea Cellular’s parent company, would have 26% shares.