"In the current scenario, while the merger of Vodafone-Idea makes them dominant player, the competition could still be high in the data business within the industry", Abhishek Anand, Fund Manager - Centrum Broking Ltd, said. However, vodafone will have the sole right to appoint the chief financial officer.
British telecom company Vodafone's Indian unit on Monday announced a merger with Idea Cellular, a local company, creating India's largest telecom operator, with around 400 million customers.
The planned combination would create India's largest wireless-network operator with nearly 400 million customers and bolster Vodafone's position in one of the world's largest and most-promising telecom markets.
The Birlas will have the right to acquire more shares from Vodafone under an agreed mechanism with a view to equalising the shareholdings over time, said a joint statement by the two companies. Ideas turnover is Rs 36,000 crore.
After this stake purchase worth Rs 3,900 crore, the Aditya Birla Group will hold 26%, while Vodafone will own 45.1% in the merged company.
The merged entity is expected to have almost 400 million customers representing about 35 percent market share.
Vodafone chief executive Vittorio Colao said: "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 are very complementary".
Will Vodafone's new Idea work?
Both Idea Cellular and Vodafone India are present in all 22 telecom circles in India and have 4G connectivity in 17 circles.
"The name of the combined listed company will be changed in due course", the statement added.
Colao also said the merger makes possible synergies of Dollars 10 billion, adding that both brands, considering their strengths, will continue to operate separately. "From the government's perspective, it will mean stability in terms of payments because it is a stronger entity that will emerge", COAI Director General Rajan Mathews said. "The agreement by Bharti Airtel to buy Telenor's Indian telecom operations is the latest sign that the entry of aggressive new operator Reliance Jio is spurring incumbents to consolidate to better meet the intense competition and weaker telcos to exit altogether", Fitch Ratings had said in a note last month. "It will help bring in operational efficiencies and improved quality of service to customers", said Arpita Pal Agrawal, Partner and Leader-Telecom, PwC India. The stock closed at Rs 97.6 on Monday.
The remaining 28.9 per cent will be held by other shareholders.