Idea-Vodafone merger gets NCLT approval
30 August 2018
The National Company Law Tribunal (NCLT) has approved the merger of Idea Cellular Ltd and Vodafone India Ltd, the Indian arm of British telecom major Vodafone Group Plc, television channels reported today.
This clears the way for merger of India’s second and third-largest telecom service providers to form the largest telco in the country.
Idea, a part of the Kumar Mangalam Birla-led Aditya Birla Group, and Vodafone signed a merger agreement last year, as a last-ditch attempt to save the two companies from disintegrating under the price war sparked by the entry of billionaire Mukesh Ambani’s Reliance Jio.
The merger was perhaps the last in a long chain of mergers and acquisitions among India’s network operators, who are rushing to consolidate amid a year-long.
The merged Vodafone-Idea entity is likely to face a tough time defending its market share and holding on to its high-ARPU data customers as it still faces the threat of competition unleashed by Jio.
Also, the new entity may be unable to make investments needed to augment 4G network capacity and buy enough spectrum for the emerging 5G applications.
The Vodafone Group, meanwhile, is offering generous payouts, or ‘VRS’, to its strong performers who could not be accommodated in the merged entity, reports quoting people familiar with the development said.
Vodafone Idea Ltd is expected to officially start as India’s largest mobile phone operator next week – on what is internally termed ‘Day Zero’ – with cost-cutting measures aimed at returning to profitability topping its priority list, reports citing people familiar with the matter said.
Meanwhile, engineers of TCS, one of Vodafone's technology vendors, are working round the clock to ensure the user interface is ready before the formal launch of the merged entity.
While the merger of Vodafone and Idea Cellular is likely to be announced in the next few weeks, analysts tracking the merger process said the technology integration may take at least four years as a large amount of data and network integration are required in the background.
While most of the transformation is likely to be in phases, analysts say the data migration involved in the merger would take two to four years to complete.