Vodafone India has the largest voice and data traffic usage within the Vodafone Group and has more than 200 million customers.
Vodafone India and Vodafone Mobile Services have a combined turnover of about Rs 454 billion while Idea has a turnover of about Rs 360 billion.
Prior to the merger, it was speculated that the combined entity will generate a revenue share of around 40 per cent and a subscriber base of over 380 million, according to India Ratings and Research.
In a separate BSE filing, Idea Cellular said it plans to raise Rs 500 crore through non-convertible debentures on private placement basis.
Vodafone will hold 45 per cent stakes in the new company.
The appointment of a chief executive officer and a chief operating officer would require the approval of both companies, which would get the right to nominate three board members each.
After the company's merger with Vodafone India, shares issued to the latter in pursuant of the merger of VMSL with the company would stand cancelled, the company said.
The promoters of Idea Cellular have the sole right to appoint the chairman.
"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.
"Post such cancellation, the company shall issue an aggregate number of equity shares of the company to 50 per cent of the post issue paid-up capital of the company to the shareholders of Vodafone India", it said. Vodafone will appoint the CFO of the company.
Vodafone could decide to sell part of its stake in the merged company, while the Birlas would likely offer to buy shares from other investors after the merger to bring their holding to about 26 percent, according to the people. The board will also consist of independent directors.
Vodafone will own 45.1 percent of the merged entity, after it transfers about 4.9 percent to promoters of Idea and/or their affiliates for 38.74 billion rupees ($592.15 million) in cash, Idea said.
The telecom industry in India is already reduced to a four players' game - Reliance Jio being the new one, and Bharti Airtel, Vodafone and Idea as the incumbents.