In a release dated today on the company’s website, UK-based Vodafone (VOD 26.47, -0.08 -0.30%) announced that the company’s India subsidiary, Vodafone India, would merge with Mumbai-based Idea Cellular to form India’s largest telecom provider.
Specifically, VOD and Idea detailed a plan that would create a combined company with an implied enterprise value of INR828 billion, or about $12.4 billion for Vodafone India and INR 722 billion, or $10.8 billion, for Idea excluding its 42% stake in Indus Towers. The deal is expected to close in the 2018 calendar year.
After the deal is done, VOD will own 45.1% of the combined company after transferring a stake of 4.9% to Idea majority shareholder Aditya Birla Group for INR39 billion, circa $579 million in cash concurrent with the completion of the merger. At that time, the Aditya Birla Group would own 26.0% and have the right to acquire more shares from VOD under an agreed mechanism.
The deal, according to the two parties, would provide substantial cost and capex synergies with an estimated net present value of about INR670 billion, or $10.0 billion, after integration costs and spectrum liberalization payments with an estimated run-rate savings of INR140 billion, or about $2.1 billion on an annual basis by the fourth full year post completion.
In Mumbai today, shares of Idea fell about 10% on the report. Among the competition in India for the combined company, Airtel India finished up less than 1% in Mumbai trading today, and Reliance Industries’ Jio closed lower about 1.5% in Mumbai today.