Vodafone in €21bn Indian merger
Vodafone has agreed to merge its Indian unit with Idea Cellular, joining forces with a local partner to confront a raging price war in the world's second-largest mobile-phone market.
The European carrier will own 45.1pc after selling a 4.9pc stake to billionaire Kumar Mangalam Birla's holding companies, according to a stock exchange filing yesterday.
Birla's companies will initially hold 26pc in the publicly traded company, with the right to buy more from Vodafone.
The transaction moves an unprofitable business off Vodafone's balance sheet while providing cost savings that will help the merged company, valued at $23.2bn, (€21.5bn) compete with billionaire Mukesh Ambani. Ambani's Reliance Jio Infocomm stormed into the market last year by offering free calls and data, pressuring other carriers to consolidate.
Last month, Bharti Airtel agreed to acquire the Indian business of Telenor, after the Norwegian carrier concluded that its prospects there didn't warrant further investment.
"The deal should be viewed as a positive," giving Vodafone and Idea scale to help reduce costs, Saeed Baradar, a telecoms sales specialist at Louis Capital Markets UK, said in a note. "While there is a history of de-consolidating loss-making businesses by Vodafone's management, they have nevertheless made the right decision for their shareholders."
Vodafone rose as much as 1.2pc, to its highest in two months. Last year, it postponed plans for an India IPO and announced $12bn (€11.1bn) of additional investment and writedown. (Bloomberg)