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20 March 2017 By Liam Proud Follow @liamwardproud

The telco chief’s joint ventures in India and the Netherlands are a clever way to get scale and efficiency, and may help Vodafone’s valuation. The catch: investors depend on Vittorio Colao keeping his JV partners sweet. Too much success or too little could jeopardise the balance.

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Vodafone agreed on March 20 to merge its Indian unit with local rival Idea Cellular to create India's largest mobile telecom operator.

The companies said the deal implies a $12.4 billion enterprise value for Vodafone India and $10.8 billion for Idea, excluding the companies' respective shareholdings in Indus Towers, India's largest telecom-tower company.

As part of the deal, Vodafone will also sell 4.9 percent of the combined group to the Aditya Birla Group (ABG) for 39 billion rupees ($579 million) in cash. That will leave Vodafone with 45.1 percent of the enlarged operator and the Aditya Birla Group, Idea's parent, with 26 percent. Idea's other shareholders will own the rest.

Vodafone and ABG aim to equalise their shareholdings over time. In the following three years, ABG has the right to buy an additional 9.5 percent from Vodafone based on an equity value of 946 billion rupees. If the shareholdings are not equal by the fifth year, Vodafone will sell down to match ABG over the following five years. Until the shareholdings are equal, the voting power of Vodafone's additional shares will be exercised jointly.

Kumar Mangalam Birla, chairman of ABG, will chair the enlarged group, and Vodafone will appoint the chief financial officer. The two companies will jointly agree on a chief executive. The deal requires the approval of Idea shareholders.

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