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Idea Cellular tumbles as details of Vodafone merger disappoint investors
20-Mar-17   13:50 Hrs IST
The announcement was made before trading hours today, 20 March 2017.

Meanwhile, the S&P BSE Sensex was down 136 points, or 0.46% to 29,512.99.

On the BSE, 2.45 crore shares were traded in the counter so far, compared with average daily volumes of 48.33 lakh shares in the past one quarter. The stock had hit a high of Rs 123.75 and a low of Rs 92 so far during the day.

The stock hit a 52-week high of Rs 128.05 on 28 April 2016. The stock hit a 52-week low of Rs 66 on 9 November 2016.

The stock had underperformed the market over the past one month till 17 March 2017, rising 0.09% compared with 4.76% rise in the Sensex. The scrip had, however, outperformed the market in past one quarter, rising 41.60% as against Sensex's 11.93% rise.

The large-cap company has equity capital of Rs 3603.50 crore. Face value per share is Rs 10.

The board of directors of Idea Cellular at its meeting held today, 20 March 2017, have approved the scheme of amalgamation of Vodafone India (VIL) and its wholly owned subsidiary Vodafone Mobile Services (VMSL) with the company subject to receipt of necessary approvals of shareholders, creditors, Sebi, stock exchanges, the Competition Commission of India, the Department of Telecommunications (DoT), the Foreign Investment Promotion Board, the Reserve Bank of India and other governmental authorities and third parties (as may be required).

Upon the amalgamation becoming effective, the entire business of VIL and VMSL (excluding VIL's investment in Indus Towers, its international network assets and information technology platforms) will vest in Idea Cellular. The agreement contemplates the completion of the proposed amalgamation within a period of 24 months.

Vodafone India has a net worth of Rs 12855 crore and a turnover of Rs 5025 crore. Vodafone Mobile Services has a net worth of Rs 3737 crore and turnover of Rs 40378 crore. Idea Cellular has a net worth Rs 24296 crore and turnover of Rs 36000 crore.

All the entities forming part of the amalgamation are engaged in the business of cellular mobile telecommunication services pursuant to licences granted to them by the DoT. The board of directors of Idea Cellular believes that the proposed amalgamation will result in creation of largest Indian telecom operator with widest mobile network in the country and pan India 3G/4G footprint. It will provide sufficient spectrum to complete with major operators in the market while offering innovative and attractively priced mobile service to customers. The amalgamation will acceleration of expansion of wireless broadband networks across India to deliver the Government of India's 'Digital India” mission. It will create substantial cost and capex synergies creating value for shareholders; and leverage the customer's affinity for both the existing brands.

On the scheme of amalgamation of VMSL with Idea Cellular becoming effective, Idea Cellular will issue an aggregate number of its equity shares to VIL equal to 47% of the post issue paid-up capital of Idea Cellular on a fully diluted basis. Immediately thereafter, on the amalgamation of VIL with Idea Cellular, the shares issued to VIL pursuant to the amalgamation of VMSL with Idea Cellular shall stand cancelled and, post such cancellation, Idea Cellular shall issue an aggregate number of equity shares of Idea Cellular (credited as fully paid-up) equal to 50% of the post issue paid up capital of Idea Cellular to the shareholder of VIL (Vodafone).

Vodafone will own 45.1% of the combined company after transferring a stake of approximately 4.9% to the promoters of Idea/their affiliates (together promoters of Idea) for Rs 3874 crore in cash concurrent with the completion of the amalgamation. The promoters of Idea will hold 26% of the company and the balance will be held by the public.

The promoters of Idea Cellular have the right to acquire up to a 9.5% additional stake from Vodafone under an agreed mechanism with a view to equalising the shareholdings over time. If Vodafone and the promoters of Idea do not have equal shareholding by the expiry of the 4th year from completion of the amalgamation, Vodafone is obliged to reduce its holding in order to equalise its ownership with that of the promoters of Idea over the following 5 year period. Until equalisation is achieved, the additional shares held by Vodafone will be restricted and votes will be exercised jointly under the terms of the Shareholders' Agreement.

The shareholders' agreement will become effective only upon the scheme of amalgamation becoming effective. None of the above including the scheme of amalgamation, the entry into the shareholders' agreement and the entry into the implementation agreement is a related party transaction.

On consolidated basis, Idea Cellular reported a net loss of Rs 383.88 crore in Q3 December 2016 compared with net profit of Rs 659.36 crore in Q3 December 2015. Net sales declined 3.7% to Rs 8660.74 crore in Q3 December 2016 over Q3 December 2015.

Idea Cellular is one of the leading telecom operators in India.

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