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Idea Cellular, Vodafone India confirm merger to create India's largest telecom company

Chairman of the Aditya Birla Group Kumar Mangalam Birla will head the merged entity.

The proposed merger between Idea Cellular and Vodafone India has been approved by the boards of both companies, the Bombay Stock Exchange was told on Monday. The merger will create the country’s largest telecom company with Rs 80,000 crore in revenue, reported The Economic Times.

Kumar Mangalam Birla, chairman of the Aditya Birla Group, will head the merged company. “I am pleased and honoured to be the chairman of the new company,” he said after the announcement. Vodafone will pick the chief financial officer for the company, PTI reported. Idea is owned by the Aditya Birla Group, while Vodafone India is managed by its parent company, based out of London.

An official statement said Vodafone will control 45.1% stakes in the new company, while Idea Cellular will have 26% shares and the rest will be owned by the public. The merger will be completed by 2018 and the new entity will eventually get a new name and identity.

“The promoters of Idea have the right to acquire up to a 9.5% additional stake in from Vodafone...,” Idea Cellular said in a statement. “If Vodafone and the promoters of Idea do not have equal shareholding by the expiry of the fourth year from the completion of amalgamation, Vodafone is obliged to reduce its holding in order to equalise its ownership with that of the promoters of Idea over the following five years.”

After an initial rally of 14.25%, Idea’s stocks dropped by nearly 15% over its low stake in the new venture. Vodafone India has been meaning to list itself on the Bombay Stock Exchange since 2010. But the plans have been delayed owing to the current scenario in the mobile network market. The deal with Idea may give Vodafone its desired listing in India.

The tie-up is largely considered a reaction to the launch of Mukesh Ambania’s Reliance Jio.

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