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With the mega-merger between Idea Cellular and Vodafone gaining ground, there is news that both the companies look to sell 15-20 percent of the merged entity to financial investors, as reported by CNBC-TV18.
That investor could well be Masayoshi Son’s Softbank, who is supposed to be in talks with Vodafone Plc to buy a minority stake in its Indian unit, say sources to Economic Times. The Japanese investor could very well be buying the 15-20 percent of the merged entity.
Idea-Vodafone together may own around 51 percent in the merged entity and may also invite offers from private equity funds for stake sale in the resulting company, which may help them pare debt, infuse capital and be at par with Bharti Airtel and Reliance Jio.
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 below 50 percent.
The UK-based Vodafone PLC has invested around USD 28 billion in its Indian arm.
It is understood that Softbank’s Vision Fund will be closing its mega USD 100 billion fund. ET sources close to the firm said that the fund could be scouting for buyout deals in the telecom and other sectors in the country. If 15-20 percent stake is bought by Softbank in the merged entity then it would give them 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 a revenue of around Rs 77,500-80,000 crore besides eliminating duplication of spectrum and infrastructure capex.
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 Rs 12,000 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.
Moreover, 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 space in the US where it has invested in Sprint and is in talks to merge this with T-Mobile.
In the US too Softbank is involved in the telecom space, post its investments in Sprint.
Masayoshi Son’s Softbank also has an investments in the Indian consumer internet startups such as Ola, Snapdeal.
However, in a clarification to some news agencies, Softbank has denied any such plan for a stake buy.
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