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March 25, 2017

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Vodafone, Idea tie-up creates India's biggest telecom firm

MUMBAI -- British mobile phone giant Vodafone will merge its Indian unit with Idea Cellular to create the country's largest telecoms operator, the firms said Monday, as they combine to fight a price war sparked by the country's richest man.

The confirmation ended months of speculation that the two operators were ready to sign a deal to help fend off the Mukesh Ambani-backed Reliance Jio, whose recent arrival has shaken up India's ultra-competitive mobile network market.

"Vodafone Group Plc and Idea Cellular today announced that they have reached an agreement to combine their operations in India," they said in a statement to the Bombay Stock Exchange (BSE).

"The combined company would become the leading communications provider in India with almost 400 million customers, 35 percent customer market share and 41 percent revenue market share," the statement added.

Jio launched in September with an audacious free service for the rest of 2016, followed by vastly cheaper data plans and free voice calls for life, forcing rivals to dramatically slash their tariffs.

It also left competitors scrambling to match the deep pockets of Jio, which is backed by India's hugely wealthy energy-to-chemicals conglomerate Reliance Industries, and caused a rush towards consolidation in the multi-billion-dollar sector.

The combined Vodafone-Idea company will overtake Bharti Airtel as India's largest network provider.

Shares in Idea initially soared following the announcement but then tanked almost seven percent, with reports saying investors were worried the deal undervalued Idea.

Vodafone will hold 45.1 percent of the merged entity after it transfers a 4.9 percent stake to Idea backers for 39 billion rupees (US$579 million) in cash.

Idea will hold 26 percent in the combined company and the merger will take up to two years to complete.

The agreement excludes Vodafone's 42 percent stake in Indus Towers.

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