Softbank denies move to buy stake in Vodafone-Idea

With the mega-merger between Idea Cellular and Vodafone gaining ground, reports say both the companies are looking to sell 15-20 per cent of the merged entity to financial investors.

Vodafone Plc is in talks with Masayoshi Son's Softbank to sell a minority stake in its Indian unit, according to an Economic Times report citing sources. The Japanese investor could very well buy 15-20 per cent of the merged entity.

However, in a clarification to some news agencies, Softbank has denied any plan for a stake buy in Vodafone-Idea.

Idea and Vodafone together may own around 51 per cent in the merged entity and may also invite offers from private equity funds to acquire a stake in the resulting company, which may help them pare debt, infuse capital and be at par with Bharti Airtel.

If Softbank emerges as the investor then it could help Vodafone Plc to reduce debt in its Indian operations and gradually help its exit from India. So far, Indian operations haven't yielded any profits to the company. It will also help the company reduce its shareholding in the merged entity to below 50 per cent.

The UK-based Vodafone PLC has invested around $28 billion in its Indian arm.

It is understood that Softbank's Vision Fund will be closing its mega $100 billion fund. The Economic Times' sources said that the fund could be scouting for buyout deals in the telecom and other sectors in the country. If a 15-20 per cent stake is bought by Softbank in the merged entity then it would give it a solid base in the space.

The combined entity (Vodafone-Idea) will create India's largest telecom firm with a revenue share of around 40 per cent and a subscriber base of over 380 million, according to India Ratings and Research. The report also states that the entity will create revenue of around Rs77,500-80,000 crore besides eliminating duplication of spectrum and infrastructure spending.

The India Ratings and Research report also says that the spectrum of Vodafone India in seven circles and that of Idea in two, whose permits are expiring in 2021-22, is together valued at around Rs12,000 crore as per last auction price. These permits are not in common circles, and hence there could be potential spectrum capex synergies between the two companies.

However, both the companies would need to work on synergies to comply with the rules given the present spectrum holding, revenue and subscriber base. (See: Vodafone-Idea merger may be less than a month away). The relation between Softbank and Vodafone is almost a decade old. It started when the Japanese firm had bought Vodafone's operations in Japan in a bit to challenge local giants like NTT Docomo and KDDI Corop.

Softbank is also active in the telecom segment in the US where it has invested in Sprint and is in talks to merge this with T-Mobile.

Softbank also has an investments in the Indian consumer internet startups such as Ola and Snapdeal.