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Mobile services

Vodafone-Idea Merger Enters Last Leg

The long-anticipated merger between Vodafone India and Idea Cellular is nearing completion, with the operators putting the final touches to the deal and clearing regulatory barriers.

The two companies recently announced the managers of the individual circles (or service areas) of the merged entity. Idea Cellular Ltd. and Vodafone India will each have executives in charge of nine circles, with some of those managers already in place.

The latest staffing moves came after India's Department of Telecommunications (DoT) had appeared to put a spanner in the works of the proposed merger. Reports suggested the DoT had asked the two companies to clear license fees, spectrum usage charges and one-time spectrum payments before it would approve the merger, which would create the country's largest telco, with a combined user base of 430 million subscribers.

However, it has now emerged that India's government has agreed to let the companies clear all dues after the merger. Together, the two operators owe the government a total of 190 billion Indian rupees ($2.8 billion) in regulatory fees, including INR91.3 billion ($1.35 billion) from Vodafone and INR97.3 billion ($1.4 billion) from Idea.

Consolidation and new name
Idea Cellular has also called for an extraordinary general meeting (EGM) on 26 June to approve changing the company's name to Vodafone Idea Limited. (See Vodafone, Idea Strike $23B Deal to Form India's Biggest Telco.)

The EGM will further make a decision on the raising of INR150 billion ($2.2 billion) through debt instruments. Vodafone, meanwhile, has said it will invest INR80 billion ($1.1 billion) in the merged entity.

Ahead of the merger, the operators have been consolidating their businesses by selling related entities and subsidiaries. Both Vodafone and Idea have sold their tower assets to US-based ATC Telecom Infrastructure Private Limited. Idea is getting INR40 billion ($59 million) from selling 9,900 towers, while Vodafone has sold 10,926 for INR38.5 billion ($570 million).

Idea Cellular earlier this year sold an 11.5% stake in Indus Towers, the country's largest telecom tower company. Vodafone continues to hold a 42% stake in that business, a majority of which is owned by Bharti Airtel.

With most of the hurdles out of the way, the Vodafone-Idea deal is nearly at the finishing line.

The combined entity would be the country's largest operator. Though its shareholding structure is not yet known, the contours of the deal suggest Vodafone will own 45.1%, while Aditya Birla Group (the controlling shareholder in Idea) will hold a 26% stake. The rest of the business would then be in the hands of other Idea shareholders.

— Gagandeep Kaur, contributing editor, special to Light Reading

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