Vodafone Group Plc (LON:VOD) announced today the completion of the merger between Vodafone India Ltd and Idea Cellular Ltd. The combined entity will be renamed Vodafone Idea Ltd. Vodafone Idea shortly and will remain listed on the Indian stock exchanges1. Vodafone Idea is jointly controlled by Vodafone and the Aditya Birla Group. The Chairman of the Board of Vodafone Idea is Kumar Mangalam Birla and the Board has appointed former Vodafone India COO, Balesh Sharma, as the CEO.
The merger creates India’s leading telecoms operator, with nearly 408m customers. During the twelve months to 30 June 2018, Vodafone India and Idea generated revenue of INR585bn (€7.1bn) and EBITDA of INR107bn (€1.4bn)2. Vodafone Idea is expected to generate INR140bn (€1.7bn) run-rate cost and capex synergies, equivalent to a net present value of approximately INR700bn (€8.5bn)3.
As at 30 June 2018, the combined cash balance of Vodafone Idea was INR193bn (€2.3bn)4 and its net debt was INR1,092bn (€13.2bn), both after adjustments for the INR39bn (€0.5bn) payment of spectrum liberalisation cost5 made to the DOT and INR86bn (€1.0bn) of equity funding contributed by Vodafone Group, in accordance with the terms of the merger agreement. More than 80% of this net debt is owed to the Indian Government and is without covenants. On this basis, and adjusting for expected run-rate opex synergies of INR84bn (€1.0bn), the combined entity would be levered at 5.7x LTM EBITDA6. Vodafone Idea will have the option to monetise Idea’s 11.15% stake in Indus Towers upon completion of the merger of Bharti Infratel and Indus Towers, expected before the end of the financial year ending 31 March 2019. Based on the terms of the Bharti Infratel and Indus merger agreement, this would currently equate to a cash consideration of INR51bn (€0.6bn)7.
Aditya Birla Group is separately completing the purchase of a 4.8% stake in Vodafone Idea from Vodafone Group for a total consideration of INR26bn (€0.3bn), in accordance with the maximum price payable under the SEBI pricing guidelines. After taking these proceeds into account, this implies a net capital injection by Vodafone Group of INR60bn (€0.7bn). Following completion, Vodafone will own a 45.2% stake in Vodafone Idea and Aditya Birla Group will own a 26.0% stake, both on a fully diluted basis. Vodafone will also separately hold a 29.4%8 stake in the combined entity resulting from the merger between Bharti Infratel and Indus Towers.
