The Department of Telecommunications (DoT) on Thursday gave final approval to the Vodafone Idea merger, making Vodafone Idea Ltd. India’s largest telecom operator, displacing Bharti Airtel Ltd. from the position.
The final approval came after Vodafone and Idea made a joint payment of ₹7,268 crore to the Telecom department on Tuesday under protest, with Vodafone shelling out ₹3,342 crores in cash and Idea paying ₹3,342 as bank guarantee.
To complete the last round of formalities, both companies will have to approach the Registrar of Companies (RoC) to register the merged entity as a legal body. The new merged entity will be called Vodafone Idea Ltd, which will be headed by new CEO Balesh Sharma, who has been with Vodafone (which was back then called Hutch) since 2003 and became COO of Vodafone in 2017. The company will have a market share of 35% and a combined user base of 43 crore customers across the country. Kumar Mangalam Birla, chairman of the Aditya Birla Group will be the non-executive chairman of the merged company.
According to the agreement between both companies, Vodafone will own 45.1% stake in the new company, while Idea will own 26% stake. However, Aditya Birla group, Idea’s parent company, will be allowed to acquire upto 9.5% additional stake from Vodafone over time, in order to equalize shareholdings in the future.
While both companies have paid off the spectrum dues for now, they have paid the amount under protest, which leaves room for legal disputes in the future.
The merger, which was announced on March 20, 2017, has been seen as an attempt to survive in the cut-throat market Reliance Jio’s entry into the industry has created. Since Jio’s entry into the market in 2016, Idea has reported losses in every quarter.
Jio had stormed India’s telecom industry with is cheap data plans and free voice calls, and rival operators such as Vodafone, Idea and Airtel had since then scurried to cut prices and expand their own networks.