Under the terms of the deal, Vodafone to combine its subsidiary Vodafone India, excluding its 42% stake in Indus Towers, with publicly listed Idea, Vodafone claimed that the combined entity will accelerate the pan-India expansion of wireless broadband services using 4G/4G+/5G technologies, support the introduction of digital content and IoT services and expand financial inclusion through mobile money services in the country.
The agreement values Vodafone India at INR828 billion (€11.8 billion) or 6.4 times EBITDA, and Idea, excluding its stake in Indus Towers, at INR722 billion, or 6.3 times EBITDA.
Vodafone will own 45.1% of the combined entity after transferring a stake of 4.9% to the Aditya Birla Group for about INR39 billion post-merger. The Aditya Birla Group will then own 26.0% and has the right to acquire more shares from Vodafone under an agreed mechanism with a view to equalising the shareholdings over time.
Vodafone India will be deconsolidated by Vodafone on announcement and reported as a joint venture postclosing, reducing Vodafone Group net debt by approximately INR552 billion.
Prior to completion of the transaction, Vodafone and Idea intend to sell their standalone tower assets and Idea’s 11.15% stake in Indus Towers to reduce leverage in the combined company.
The pair said that capex synergies from the merger are estimated at approximately INR670 billion.
The deal is expected to close next year.
Aditya Birla Group chairman, Kumar Mangalam Birla, said: “Throughout its history, the Aditya Birla Group has been synonymous with the task of nation building and driving inclusive growth in the country. This landmark combination will enable the Aditya Birla Group to create a high quality digital infrastructure that will transition the Indian population towards a digital lifestyle and make the Government’s Digital India vision a reality. For Idea shareholders and lenders who have supported us thus far, this transaction is highly accretive, and Idea and Vodafone will together create a very valuable company given our complementary strengths.”
Vodafone Group CEO Vittorio Colao said: “The combination of Vodafone India and Idea will create a new champion of Digital India founded with a long-term commitment and vision to bring world-class 4G networks to villages, towns and cities across India. The combined company will have the scale required to ensure sustainable consumer choice in a competitive market and to expand new technologies – such as mobile money services – that have the potential to transform daily life for every Indian. We look forward to working with the Aditya Birla Group to create value for all stakeholders.”
Vodafone’s Indian business was, along with its UK operation, a major drag on its 2016 full-year results, thanks to intense price competition in the Indian market.