CCI approves $23 billion Vodafone India-Idea merger deal

The Competition Commission of India (CCI) has approved the merger of Vodafone India, the local arm of British telecom major Vodafone Plc and Aditya Birla group telecom arm Idea Cellular, reports quoting sources close to the development said.

CCI is reported to have sought no further scrutiny of the $23-billion all-stock merger, while sending letters of approval to Vodafone and Idea, sources said.

Vodafone India and Idea Cellular, currently ranked at No 2 and 3, respectively, will have a combined base of nearly 400 million customers and 41-per cent revenue market share post merger, creating a stronger entity than rival Reliance Jio Infocomm in scale, size and synergies.

The merger was forced on the two by the disruptive market entry of Reliance Jio, with is back-to-back free voice and data offers between September last year and March 2017.

In March, Vodafone India and Idea agreed to merge operations, in a deal that would create the country's biggest telecom player, after the entry of new entrant Reliance Jio sparked a price war.

The deal has been pending approval from Competition Commission of India (CCI), along with other regulatory clearances.

Vodafone and Idea will now have to move Sebi for its requisite approvals.  All other regulatory approvals for the merger are expected within six months, sources said.

Vodafone and Idea have assured the government they will return spectrum in whichever circle mandated. NCLT will oversee the merger to see the merger follows DoT and M&A guidelines.

"Upon the amalgamation becoming effective, the entire business of VIL and VMSL, excluding VIL's investment in Indus Towers Limited, its international network assets and information technology platforms, will vest in the company," Idea Cellular had stated in a regulatory filing.

Vodafone's market share was 18.16 per cent with 204.68 million mobile customers and that of Idea was 16.9 per cent with 190.51 million at the end of December 2016, as per the Trai data.

The British telecom major has brought in its former India unit chief Marten Pieters to work on the proposed merger.

Vodafone Group chief executive Vittorio Colao is also likely to brief all business heads of the Indian arm in a conference call next week about the proposed merger.

If the deal is successful, the combined entity will create India's largest telecom firm with a revenue share of around 40 per cent and a subscriber base of over 380 million, according to India Ratings and Research.

The merged entity will have a revenue of around Rs77,500-80,000 crore, besides eliminating duplication of spectrum and infrastructure capital expenditure.

Further, the spectrum of Vodafone India in seven circles and of Idea in two, whose permits are expiring in 2021-22, is together valued at around Rs12,000 crore as per the last auction price.

These permits are not in common circles, and hence there could be potential spectrum capex synergies between the two companies, the report said.

However, given the present spectrum holding, revenue and subscriber base, both the companies need to work on synergy to comply with rules.

According to the merger and acquisition rules, an entity should not hold more than 25 per cent spectrum allocated in a telecom circle and 50 per cent on spectrum allocated in a particular band in a service area.

The merged entity should also not have more than 50 per cent revenue and subscriber market share.

The combined entity as per present scenario will breach spectrum cap in 900 MHz band in Maharashtra, Gujarat, Kerala, Haryana and UP West and in 2,500 MHz band in Maharashtra and Gujarat, according to reports.