The market is rife with speculations of a Vodafone-Idea merger. Such an event would create the largest entity in the country and could have far reaching impacts upon the constantly shifting telecom landscape. Well, in case such an event does occur, Aditya Birla Group’s chairman Kumar Mangalam Birla could well be nominated as the chairman of the merged entity as well.
As per Livemint, which cites people familiar with the matter, the merged entity is likely to have a total of 12 directors. While 3 each would come from Idea and Vodafone India Limited, the remaining 6 would be independently appointed.
Meanwhile, a concern involving the amount of control both the parties will have in the merged entity, has also surfaced. Vodafone will likely be spinning off its India business and will have to demonstrate that it doesn’t have greater control in the merged entity. In order to do this under the International Financial Reporting Standards (IFRS),
a company has to demonstrate that it no longer has operating or management control in the subsidiary.
The companies won’t have a 50-50 stake division either. While Vodafone’s stake would fall well below 51%, reports peg to still remain higher than the Aditya Birla Group’s share.
In an ideal situation, both sides should hold around 37% each in the merged entity, but for that to happen, the Aditya Birla Group will have to infuse fresh funds upwards of $1 billion.
Of course, the Aditya Birla group could well come up with the funds required. However, there are more likelihoods of an arrangement that sees the Aditya Birla Group holds between 26% and 30%, but also has special rights. The nature of these “special rights” wasn’t defined. The new entity could use the Vodafone branding to offer its services under a common flag.
Meanwhile, if — and when — the merger does take place, it will create an entity with a combined revenue upwards of Rs 78,000 crore. It will also have a 43% share of the market, pegging it ahead of current leader Bharti Airtel Ltd. The move appears to have been prompted partially in response to Reliance Jio Infocomm Ltd, which has garnered millions of users in a very short span thanks to its aggressive marketing tactics and the variety of free data/voice call offers it has put on the table.
