Idea Cellular goes for fund raising before Vodafone merger

Idea Cellular 4G GoaIndia’s third largest telecom operator Idea Cellular will be going for a major fund raising program before its merger with Vodafone.

Vodafone and Idea Cellular said they expect the merger to be completed during the first half of calendar 2018. Vodafone and Idea Cellular received approval from CCI, the shareholders and creditors. NCLT and DOT approvals are pending.

Idea Cellular will mobilize up to INR 67.5 billion or €882 million of equity via INR 32.5 billion or €425 million preferential allotment to the Aditya Birla Group entities (ABG).

Idea Cellular’s Board will also evaluate the best option for raising up to an additional INR 35 billion or €457 million of equity through a further preferential allotment, qualified institutional placement, rights issue or such other route.

The proceeds from this capital and the INR 78.5 billion or €1 billion from the disposals of Vodafone India’s and Idea’s standalone tower businesses, will be used to strengthen the balance sheet of the merged entity between Vodafone India and Idea.

Mayuresh Joshi, fund manager at Angel Broking, said: “The fund raising plan of Rs 3,250 crore will aid Idea Cellular in terms of deal apprising in their balance sheet. The move was also necessitated by the fact that Idea needed to ramp up its product offerings and strengthen its infrastructure requirements.”

ABG will increase its stake in Idea from approximately 42 percent to approximately 47 percent, after the preferential allotment.

ABG and Vodafone have agreed that ABG will buy 2.5 percent of the merged entity from Vodafone to own at least 26 percent of the merged entity.

Vodafone will receive INR 19.6 billion or €256 million from such sale. Vodafone’s stake in the entity is expected to be approximately 47.5 percent at completion.

Vodafone’s stake in the combined entity in excess of 45.1 percent will not be subject to any lock-up after closing and Vodafone will be free to sell the relevant shares without restrictions.

Vodafone India’s contribution of net debt to the merged entity and Vodafone’s funding requirement will be dependent on Idea’s net debt at completion of the merger.

Vodafone will contribute INR 24.8 billion or €323 million more net debt than Idea at completion.

Idea Cellular in a separate communication said it will issue 326.6 million shares at a price of Rs 99.5 per share on preferential basis to the Promoter group entities for INR 32,500 million.

“At a time when the telecom industry is going through a challenging environment, this equity infusion by the Group in Idea is another step towards reinforcing the group’s commitment,” said Kumar Mangalam Birla, chairman, Idea Cellular.

Idea has added over 33,500 wireless broadband sites and the current ~ 143,500 broadband sites now cover ~ 620 million Indian population (~52% of population) during the first nine months of the financial year 2017-18. Idea is also moving fast to launch its VoLTE services during calendar year 2018.