Vittorio Colao has described the $23.1 billion merger of Vodafone India and Ideal Cellular as a “pretty momentous” deal.

The merger was confirmed this morning, two months after talks between the UK-based operator and Idea owner Aditya Birla Group (ABG) were announced.

The deal values Vodafone India at INR828 billion (US$12.4 billion) and Idea at INR722 billion (US$10.8 billion).

The combined entity would become the leading communications provider in India with almost 400 million customers and a 35 percent market share.

Subject to regulatory approval, the deal is expected to close in 2018.

Vodafone CEO Vittorio Colao said the deal was “a good financial transaction and an important strategic move”.

He added: “It’s pretty momentous.”

Vodafone will cut its net debt by approximately INR552 billion (US$8.2 billion) and the UK-based operator has forecast cost and capex synergies for the new venture to be around INR670 billion (US$10 billion) after integration costs and spectrum liberalisation payments.

The arrival of Reliance Jio, which has offered free data to consumers, has forced India’s players into action.

[Read more: Telenor to quit India, after agreeing sale to Bharti Airtel]

But with Jio’s offer of free data set to end this month, Colao sounded confident that the new business would have the scale and assets to compete on a more even footing moving forward.

Vodafone CFO Nick Read said a key part of the deal was that it would give the new business spectrum in every one of the 22 “circles” in India.

Although a new company name will be revealed in due course, both the Vodafone India and Idea Cellular brands will continue to operate in the first instance.

ABG Chairman Kumar Mangalam Birla will take on the same role in the new company, while Vodafone will have the sole right to appoint a CFO.

Both companies will jointly agree on the CEO and COO.

In total, there will be 12 directors including three appointed by each of Vodafone and the ABG, and six independent directors.

Vodafone will own 45.1 percent of the combined company after transferring a stake of 4.9 percent to ABG.

ABG will then own 26 percent and Idea’s other shareholders will own the remaining 28.9 percent.

As announced previously, the deal does not include Vodafone’s 42 percent stake in Indus Towers.

However, Vodafone said it planned to look at a partial or full disposal of that business.

Vodafone and Idea also revealed that they plan to sell their standalone tower assets and Idea’s 11.15 percent stake in Indus Towers to reduce leverage in the combined company.

ABG has the right to acquire up to a 9.5 percent additional stake from Vodafone with a view to equalising the shareholdings over time.

If Vodafone and ABG’s shareholdings in the combined company are not equal after four years, Vodafone will sell down shares in the combined company to equalise its shareholding to that of ABG over the following five-year period.

Vodafone saw revenues at its Indian opco decline 1.9 percent year-on-year to €1.45 billion in the three months to December.

Vodafone Group CEO Vittorio Colao said: “The combination of Vodafone India and Idea will create a new champion of Digital India founded with a long-term commitment and vision to bring world-class 4G networks to villages, towns and cities across India.

“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.”

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