With Idea Cellular and Grasim, an Aditya Birla company, together investing ₹32 crore in the Aditya Birla Idea Payments Bank, Vodafone may end up indirectly holding a stake in the bank. This will bring to question the future of Vodafone’s payments’ bank venture, m-pesa, industry sources said.

The investment into the Idea Payments Bank is as per the RoC documents sourced through business intelligence platform, paper.vc. Idea Cellular holds a 49 per cent stake in the payments bank venture.

This investment follows the successful completion of the merger of Idea Mobile Commerce Services Ltd (IMCSL) with Aditya Birla Idea Payments Bank (ABIPB) resulting in the issue of payments bank shares to Idea Cellular in lieu of Idea Mobile Commerce shares in March 2018.

The company hopes a major part of its telecom subscribers to enrol for the banking services. Payment banks are not allowed to lend, but take can deposits, facilitate remittances and dispense payments to recipients.

This follows the report that the Department of Telecommunications has approved the clearing of spectrum charges by a merged Vodafone-Idea entity, a key step in the merger between the two telecom players.

Scheme of amalgamation

The board of Idea Cellular has also already finalised the scheme of amalgamation with Vodafone India and its subsidiaries which will create an entity with a revenue of around ₹80,000 crore. This will create the largest telecom company in the country. As per the agreement, Vodafone will own 45.1 per cent of the combined entity. Aditya Birla Group will own 26 per cent of the combined company. The remaining 28.9 per cent will be owned by Idea shareholders. The Birla group will have the right to buy additional 9.5 per cent stake from Vodafone over the next four years. This is to ensure that both the companies have an equal stake in the new company.

Both the companies will have rights to appoint three directors each. Idea will also the right to appoint the chairman of the combined entity while Vodafone will have the right to appoint the CFO. The new management structure is expected to evolve over the next 12-18 months. The merger is expected to be finalised within this calendar year. The combined entity will have a subscriber base of over 380 million, 35 per cent customer market share and 41 per cent revenue market share.

Tough time ahead

According to a note to the investors, ICICI Securities said the merged entity in the near term will have a tough time considering recent price cuts by Reliance Jio Infocomm and its effort to eat into the 2G base of incumbents.

“Sooner than expected merger with Vodafone (by H1CY18) and its effort of integrating the merger through active infra sharing and 4G ICR, however, does bode well for the company under the current hyper competitive scenario. We, however, highlight that with more than 75 per cent of the combined entity subscriber base being 2G and RJio’s aggressive JioPhone push indicate that pain is far from over on competition front,” the note said.