After CCI, Sebi seeks details of Idea-Voda merger plan

18 May 2017

The Securities and Exchange Board of India (Sebi) has sought details about the proposed merger of Aditya Birla Group promoted Idea Cellular with Vodafone Plc's Indian arm after the Competition Commission of India (CCI) ordered an investigation into allegations of cartelisation and abuse of dominance by the two telecom companies.

The market regulator has sought all information about the merger to see if it is in compliance with the securities laws. For the companies to proceed with the proposed merger, the deal has to be vetted by Sebi and the National Company Law Tribunal.

Cornered by stiff competition by Mukersh Ambani-backed start-up Reliance Jio Infocomm, Vodafone India and Idea Cellular announced merger plans in March to create the country's biggest phone company by subscribers (See: Idea, Vodafone India announce merger).

The new Rs1,55,000-crore entity would dislodge Bharti Airtel as India's top telecom firm, and would emerge as the world No.2 after China Mobile.

Vodafone Plc would own 45.1 per cent in the combined entity after transferring 4.9 per cent to the promoters of Idea Cellular for Rs3,874 crore in cash post merger. Kumar Mangalam Birla and other promoters of Idea Group will hold 26 per cent and the rest will be owned by the public. Idea Cellular will have the right to buy another 9.5 per cent (at Rs130 a share or the then prevailing market price) in the combined entity over four years from Vodafone Plc.

The merger ratio is based on Idea's price of Rs72.5 a unit. The implied enterprise value is 82,800 crore for Vodafone India and Rs72,200 crore for Idea, excluding its 11.15-per cent stake in Indus Towers. All of Vodafone India's businesses, barring its 42 per cent stake in Indus Towers, will become part of the new entity.

The Idea-Vodafone merger would, however, need approvals from the stock exchanges, Sebi, National Company Law Tribunal (NCLT) and the Competition Commission of India (CCI).

Meanwhile, CCI is reported to have found a prima-facie case of competition law violation by Vodafone, Idea and Airtel under Section 26 (1) of the Competition Act, 2002, which empowers the regulator to order a probe by its Director General of Investigation into the matter.

The CCI order directing an investigation is yet to be published on the regulator's website.