Vodafone Group has announced the completion of the merger between Vodafone India and Idea Cellular, first announced in March 2017, after receiving all regulatory approvals. The combined entity will be renamed Vodafone Idea and will remain listed on the Indian stock exchanges, Vodafone said. Vodafone Idea is jointly controlled by Vodafone and the Aditya Birla Group. The chairman of the Board of Vodafone Idea is Kumar Mangalam Birla, and the board has appointed former Vodafone India COO Balesh Sharma as the CEO.
According to Vodafone, the merger creates India's leading telecoms operator, with nearly 408 million customers. During the twelve months to 30 June 2018, Vodafone India and Idea generated revenue of INR 585 billion (approximately EUR 7.1 billion) and EBITDA of INR 107 billion (EUR 1.4 billion). Vodafone Idea is expected to generate INR 140 billion run-rate cost and capex synergies, equivalent to a net present value of INR 700 billioin.
At 30 June 2018, the combined cash balance of Vodafone Idea was INR 193 billion, and its net debt was INR 1.09 trillion, both after adjustments for the INR 39 billion payment of spectrum liberalisation cost made to the DOT and INR 86 billion of equity funding contributed by Vodafone Group, in accordance with the terms of the merger agreement.
More than 80 percent of this net debt is owed to the Indian government and is without covenants. On this basis, and adjusting for expected run-rate opex synergies of INR 84 billion, the combined entity's leverage would be at 5.7x LTM EBITDA. Vodafone Idea will have the option to monetise Idea's 11.15 percent stake in Indus Towers upon completion of the merger of Bharti Infratel and Indus Towers, expected before the end of the financial year ending 31 March 2019. Based on the terms of the Bharti Infratel and Indus merger agreement, this would currently equate to a cash consideration of INR 51 billion.
Aditya Birla Group is separately completing the purchase of a 4.8 percent stake in Vodafone Idea from Vodafone Group for a total consideration of INR 26 billion. After taking these proceeds into account, this implies a net capital injection by Vodafone Group of INR 60 billion. Following completion, Vodafone will own a 45.2 percent stake in Vodafone Idea and Aditya Birla Group will own a 26 percent stake, both on a fully diluted basis. Vodafone will also separately hold a 29.4 percent stake in the combined entity resulting from the merger between Bharti Infratel and Indus Towers.
