The U.K.’s Vodafone and Aditya Birla group firm Idea Cellular are likely to finalise within a month the mega merger deal that will create India’s largest telecom firm.
The companies are likely to announce a definitive signing agreement by February 24-25.
The British telecom major has brought its ex-India unit chief Marten Pieters to work on the proposed merger.
If the deal is successful, the combined entity will create India’s largest telecom firm with a revenue share of around 40% and a subscriber base of over 380 million, according to India Ratings and Research.
The proposed merger of Vodafone India and Idea will create an entity with a revenue of around Rs. 77,500-80,000 crore besides eliminating duplication of spectrum and infrastructure capex, the rating agency said in its report.
Further, 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 the last auction price.
These permits are not in common circles, and hence there could be potential spectrum capex synergies between the two companies.
According to the merger and acquisition rules, an entity should not hold more than 25% spectrum allocated in a telecom circle and 50% on spectrum allocated in a particular band in a service area.
The merged entity should also not have more than 50% revenue and subscriber market share. As per CLSA report, the merged entity would breach revenue market share, subscriber and spectrum caps in five markets.
Solar energy has become the cheapest it has ever been in India, thanks to historically low tariffs achieved in the reverse auction bid for three units in the Rewa plant in Madhya Pradesh earlier this month.
The two-day reverse auction bid for three 250 MW blocks in the Rewa solar plant in Madhya yielded a tariff of Rs 2.97 for each of the blocks and a levelised tariff of Rs. 3.3 over the course of the 25-year power purchase agreement.
The winners of each of the bids were Mahindra Renewables, ACME, and Solenberg Power. The Rewa plant is a joint venture of Solar Energy Corporation of India and Madhya Pradesh Urja Vikas Nigam (MPUVN).
A reverse auction in such a scenario is basically a situation where companies bid for a unit by offering the lowest tariffs at which they will sell the energy generated from the unit. The lowest tariff wins the bid.
Companies bidding for the Rewa units were able to commit to such low tariffs because of various factors, some to do with the industry, and others to do with the specific bid.
The industry-related factors include the fact that solar energy producers in India have been able to greatly reduce their costs due to the import of cheap photovoltaic panels from China.
In addition, in keeping with the government’s renewable energy push, especially its commitment to achieve 100 GW of solar energy by 2022, it has expedited the land acquisition process and has reduced excise duties on various components required to set up a solar plant.
Specific to the Rewa bid, the Madhya Pradesh government implemented a few favourable and unique structures in the project power purchase agreements.
While this does mean that solar energy will be cheaper, several industry experts have warned that, at such low tariffs, margins are also very slim.
This could mean that even a slight increase in input prices — such as pricier imports from China — could push many of these projects into unprofitability.
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