India Sensex Stock Market
March 21, 2017 - Vodaphone Idea India Telecom Merger
Vodafone India Merger with Idea Cellular Creates Country's Biggest Telecoms Business By The Street
Vodafone said Monday that it is merging its subsidiary in India with Idea Cellular that will create the country's biggest telecoms operator with over 400 million customers.
Vodafone Plc (VOD) said Monday that it is merging its subsidiary in India with Idea Cellular (ICLQY) that will create the country's biggest telecoms operator with over 400 million customers.
The deal puts the two operators -- with a combined enterprise value of $23.3 billion -- and completes talks that were confirmed by Vodafone in late January. Vodafone will own 45.1% of the combined company, the company said in a statement, after transferring a stake of 4.9% to the Aditya Birla Group for around $579 million. Aditya Birla will own 26% and have the right to acquire more shares from Vodafone over time.
"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," said CEO Vittori Colao. "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 operations in India have taken a toll on the company's bottom line, with the group reporting a first half loss of €5 billion ($5.9 billion) on a similar-sized writedown linked to a fierce price war in the market led by Reliance Jio Infocomm, a cut-price operator with the financial backing of billionaire Mukesh Ambani.
Vodafone India is the nation's second largest operator by subscriber numbers, according to the Telecom Regulatory Authority of India, with an 18.7% market share. It sits just behind Bharti Airtel Ltd., which has 24.3% of the market, while Idea Cellular is India's third largest company with a 17.2% share of the market, and a market capitalization of Rs.352 billion ($5.1 billion).
Despite its vast size and growing population, the Indian market has been a problem for Vodafone, where it has spent years fighting government tax demands. The unit recorded €3 billion ($3.18 billion) of sales for the six months ending Sept. 31 and Ebitda of €892 million. It accounts for nearly 11% of total revenue and 14% of the bottom line. It also has at least €5.5 billion of net debt.
Vodafone shares closed at 211.4 pence each in London Friday and have risen around 4.47% over the past three months, well ahead of the 0.765% gain for the FTSE 100 benchmark
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