With 35 per cent market share, the combined Vodafone-Idea group would be the country's largest telecom operation.
Idea, owned by conglomorate Aditya Birla, will pay $579m in cash to Vodafone, in return for a 4.9 per cent stake in the combined firm. It has been planning an initial public offering in India for years but hadn't been able to get the timing right.
It means that Vodafone Group has paid $16.4 billion for 100% equity in the company.It has also spent billions of dollars in buying Spectrum through various auctions.
Interestingly, both Tata Teleservices and RCOM suffered most due to price war initiated by them and were reduced to insignificant players in long term.
The price war triggered by Reliance Jio had prompted British Vodafone to write down the value of its Indian business by 5 billion euros ($5.5 billion), late previous year.
In an extremely volatile session today, the stock had surged to a high of Rs 123.75, a gain of nearly 15 per cent over the previous close, before plunging to a low of Rs 92.
Idea Cellular fell 7.9 per cent to Rs 99.50 after surging as much as 14.5 per cent. Market leader Bharti Airtel Ltd.
The companies have announced that Vodafone will combine its Vodafone India subsidiary with Idea Cellular in a deal worth around $23 billion.
Birla's holding companies will pay 38.74 billion rupees ($592 million), or 108 rupees a share, for the additional 4.9 percent stake. It will be capable of building substantial mobile data capacity, utilising the largest broadband spectrum portfolio with 34 3G carriers and 129 4G carriers across the country, said Vodafone Plc, the British Parent of Vodafone India. Vodafone Group Chief Executive Vittorio Colao said, "We are very complimentary". Some excess spectrum will be sold or returned to the government to meet regulatory requirements, he said. The companies think they can save US$2.1bn per year by 2022, four years after completion.
Vodafone India will be deconsolidated by Vodafone, and will be reported as a joint-venture after the deal closes. Birla, the chairman of the combined firm, added that the ABG has invested more than '1 lakh crore in Idea and funding for the merger will come from promoters.
Vodafone would gain a listing in India, which it has been considering since at least 2011.
The Vodafone-Idea merger has finally taken place and the outcome is the emergence of the biggest telecom player in a market that has witnessed unprecedented turbulence in recent months.
In the quarter ended December 31, Idea reported its first loss for the group in about a decade. That moves it above Bharti Airtel and puts it way ahead of disruptive newcomer Reliance Jio - although whether it can now compete better against Jio's seemingly irresistible offer of free services is still to be seen.
A huge telecoms merger has been announced in India.