Vodafone to use cash from Indian merger with Idea Cellular to pay down debt

Oliver Gill
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Vodafone boss Vittorio Colao (right) said combining Indian operations "ensure sustainable consumer choice in a competitive market" (Source: Getty)

Vodafone will use $579m (£467m) of cash realised from the merger of its Indian operations to pay down group debt, sources close to the telecoms giant have said.

Earlier today Vodafone announced it had agreed terms with Idea Cellular over a $23bn merger, a move that will create the largest mobile operator in the country.

Read more: Vodafone's Indian arm announces mega-merger with Idea Cellular

Idea, owned by conglomerate Aditya Birla, will pay $579m in cash to Vodafone, in return for a 4.9 per cent stake in the combined firm. The UK-listed firm will retain the largest stake in the merged entity with a 26 per cent share, though Idea has the option to buy up shares in the future.

Jerry Dellis, an equity analyst at Jefferies said the cash windfall could be used for "additional flexibility to re-enforce core operations, such as investing in the UK mobile network or fibre in Spain".

But sources close the firm said it was unlikely Vodafone will use the cash to invest, even in core operations. Instead, it will use the cash to reduce the group's debt facilities, which have swelled to €41bn.

Read more: Investors buoyed by reports of Vodafone talks with Liberty Global

Vodafone chief executive Vittorio Colao said: "The combined company will have the scale required to ensure sustainable consumer choice in a competitive market and to expand new technologies - such as mobile money services - that have the potential to transform daily life for every Indian.

"We look forward to working with the Aditya Birla Group to create value for all stakeholders."

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