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Vodafone, Idea Merger Creates India’s Largest Telecom Entity

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The merger between Vodafone India and Idea Cellular, two of the largest telecom firms in India, was officially announced on Aug. 31 after the National Company Law Tribunal (NCLT) approved the move. The new entity called Vodafone Idea Ltd. has  collectively acquired 408 million active subscribers and a market share of 32.2 percent, making it the largest cellular network in India.

The merger has edged out Bharti Airtel Ltd as the leading telecom service provider in India after about two decades. It is expected to generate Rs 14,000 crore in synergies annually, Livemint reported.

“Today, we have created India’s leading telecom operator. It is truly a historic moment. And this is much more than just about creating a large business. It is about our Vision of empowering and enabling a New India and meeting the aspirations of the youth of our country,” Kumar Mangalam Birla, Chairman, Aditya Birla Group and Vodafone Idea Limited, said in a statement. “The union aims to accelerate India’s progression towards a digital economy, enabling millions of citizens to connect to the digital revolution and build a better tomorrow. We will continue to offer a wide variety of digital services and solutions under both of our popular and loved brands (Vodafone and Idea).”

The new network promises to bring superior quality voice and data service experience along with a variety of digital services and solutions, including mobile payments, Internet of Things (IoT), advanced enterprise offerings and entertainment. Consumers will be offered extensive on-ground presence through about 15,000 branded outlets and 1.7 million retail touchpoints across the country, the statement said.

The merged entity will compete in the Indian telecom sector with Bharti Airtel Ltd, the Mukesh Ambani-promoted Reliance Jio Infocomm Ltd, and the government-owned Mahanagar Telephone Nigam Ltd (MTNL) and Bharat Sanchar Nigam Ltd (BSNL).

While the “marriage” between the two firms was announced on Twitter through a series of witty tweets by both the companies, Reliance Jio stole the show with a subtly teasing tweet which has been retweeted over 6,000 times, gaining over 12,000 likes.

Other social media users soon jumped into the fray, with their own wisecracks about the deal. Even Airtel India found its way into the conversation, with some customers expressing their wish to switch to Airtel.

The discussion on the social media also saw people talking about how the reason between the union is mainly Reliance Jio’s increasing customer base with their cheap data services.

The companies have together committed to creating a digital India where services will be provided to nearly 500,000 towns and villages. Both the companies jointly had a revenue of nearly Rs 58,675 crore for the last 12-month period ending June 30 and an operating margin of close to 20 percent. With the merger it is expected to have a net debt of more than Rs 1 lakh crore, while the leverage ratio (net debt-to-Ebitda) is expected to be close to nine times, according to data compiled by BloombergQuint.