The main motive behind an M&A is the synergy which will increase performance of the combined entity and decrease the operating and other costs. Growth in market share, market diversification, eliminating the cut-throat Competition are some of the added advantages that a merged entity enjoys. Today, for the same reason, we have one of the biggest mergers happening in the telecom sector i.e. the Vodafone-Idea merger.
What led to the merger talks:
Both the companies happened to be reputed ones and enjoyed a good amount of customer base. Then came the wave of Reliance Jio in September 2016 where the company came up with consumer-friendly rates for its services, which disrupted the profitability of other players in the telecom sector. A massive portion of consumer base got shifted to Reliance Jio. Days later, Vodafone-Idea announced details of the merger between the two companies to create the biggest telecom company in India. The merger is supposed to be a strategic response to Jio’s significant move, as per analysis appeared in various media reports.
This proposed merger shall combine Vodafone India Limited (a wholly owned subsidiary of Vodafone Group Plc, which is listed on London Stock Exchange) and Vodafone Mobile Services Limited (a wholly owned subsidiary of Vodafone India Limited) and Idea Cellular Limited (a part of Aditya Birla conglomerate and listed on Bombay Stock Exchange and National Stock Exchange) and will create the largest telecom player in India. Post completion of merger, Vodafone will own 45.1 per cent stake in the merged entity while the Aditya Birla group, Idea’s parent, will have 26 per cent shareholding. The remaining 28.9% by other shareholders.
The Journey Starts:
- Board Resolution:
The board of directors of Vodafone India Limited and Vodafone Mobile Services Limited, in their meeting held on 19th March, 2017, passed the necessary resolution to approve the desired merger, while the board of Idea Cellular Limited did the needful on 20th March, 2017.
- Notice to the Competition Commission of India:
On 17th April, 2017 both the telcos sent a joint notice to the CCI for seeking its approval for the proposed merger. This is in accordance with sub-section (2) of Section 6 of the Competition Act, 2002, where any enterprise proposing to enter into such combinations may give notice of such combination to the CCI in the prescribed form.
- Idea Cellular approaches Securities and Exchange Board of India (SEBI):
In April, 2017 Idea Cellular approached SEBI to seek its approval for the proposed merger. The scheme of arrangement was filed with SEBI and stock exchanges for their approvals.
- Competition Commission of India’s approval:
On 24th July, 2017 the CCI gave its final nod approving the proposed merger. The CCI carried out a comprehensive review of the transaction and concluded that there was no appreciable adverse effect on competition from the proposed merger.
- Securities and Exchange Board of India’s approval:
On 4th August, 2017 the SEBI gave its approval for the proposed merger. It also said that the “open offer” obligation is not triggered but shall depend on the final order from the National Company Law Tribunal. Further, ‘no- objection letter’ was received from the BSE and NSE. Both the exchanges expressed their reserved rights to raise objections at any stage if the information submitted to them was found to be incomplete, incorrect, misleading, false or for any contravention of rules and regulations.
- Idea Cellular approaches National Company Law Tribunal (NCLT):
On 7th August, 2017 Idea Cellular Limited filed an application before the National Company Law Tribunal’s (NCLT) Ahmedabad Bench, seeking approval for its merger with Vodafone India Limited and Vodafone Mobile Services Limited.
- NCLT orders convening of meeting:
On 21st August, 2017 the NCLT’s Ahmedabad bench ordered Idea Cellular Limited to convene a shareholders-cum-creditors meet on 12th October for the purpose of voting for its proposed merger with Vodafone India Limited. Former chief justice of Bombay High Court (HC) Justice M H Shah had been appointed by the NCLT to chair the meeting.
- Idea Cellular shareholders vote in positive:
On 12th October, 2017 the Shareholders of Idea Cellular approved the scheme of its merger with Vodafone India. Over 99 % of Idea shareholders voted in the favour of the merger at the shareholders’ meeting.
- NCLT gives its approval:
On 11th January, 2018 the NCLT’s Ahmedabad bench sanctioned the scheme of amalgamation and arrangement among Vodafone Mobile Services, Vodafone India and Idea Cellular, stating the scheme to be genuine, bona fide and in the interest of the creditors and the shareholders as well.
- Idea shareholders approve change of name:
On 26th June, 2018, Idea Cellular conducted an extraordinary general meeting in Gujarat where its shareholders, with the ‘requisite majority’, approved the resolution to change the name of the company to Vodafone Idea Ltd.
- The conditional nod from the Department of Telecommunications:
On 9th July, 2018, the Telecom Ministry gave a conditional nod to the merger. The final nod shall be given on Idea Cellular paying rupees 3900 (approx) crores in cash for Vodafone spectrum and furnish a bank guarantee of rupees 3,300(approx) crores.
- The final nod from the Department of Telecommunications:
On 26th July, 2018 the Telecom Ministry gave final approval to the merger when the dues, as demanded while giving conditional approval, were paid and settled. This resulted in 90% completion of the merger.
Note: All the above formalities have been completed till date i.e. 07/08/2018
The merger is now subject to National Company Law Tribunal, Mumbai bench, passing the dissolution order of Vodafone India Limited and Vodafone Mobile Services Limited, following which, Vodafone and its subsidiary unit will become a part of Idea Cellular. Licenses of Vodafone Mobile Services Limited and Vodafone India stand transferred to Idea Cellular Ltd, along with the assets and liabilities of both the Vodafone companies excluding 42 percent stake in Indus Towers.
This post has been contributed by Mr.Kunal Chandriani. He has done B.Com(T.Y.B.Com) from Gurukul College of Commerce, Mumbai.
Image from here