Vodafone has confirmed that they are in talks with Aditya Birla Group for a possible merger with Idea Cellular. And if the talks are successful, then the new entity would be India’s largest telecom company with a massive market share of 36% (approximately)
There were rumors going around since last few weeks regarding a possible merger, but there was no confirmation regarding the same. However, after Vodafone informed London Stock Exchange, where their stocks are listed, all doubts are now clear.
In their statement, Vodafone has made it clear that only talks are on, and no decision has been taken yet.
Their statement said, “Vodafone confirms that it is in discussions with the Aditya Birla Group about an all-share merger of Vodafone India (excluding Vodafone’s 42% stake in Indus Towers) and Idea. Any merger would be effected through the issue of new shares in Idea to Vodafone and would result in Vodafone deconsolidating Vodafone India. There is no certainty that any transaction will be agreed, nor as to the terms or timing of any transaction.”
Idea Shares Jump After Confirmation Of Merger Talks
As soon as the confirmation was announced by Vodafone in London, Idea Cellular’s stock price took a massive jump in anticipation of this deal.
While Idea’s shares were priced at Rs 79.90, the price touched a high of Rs 100.40 on Monday afternoon. At 1.40 PM, the stocks were being traded at Rs 96.30, while Vodafone’s shares witnessed an increase of 4% after the announcement.
As per some analysts, the merger will increase the Ebitda of the combined entity by 25-30%, as massive savings can be accomplished in network infrastructure costs, besides saving in SG&A costs and lowering net debt-to-Ebitda ratio by 3.3 times.
Airtel Can Be Dethroned From #1 Position?
As of now, Vodafone commands 18.72% market share, while Idea has 17.17% share. Airtel is #1 telecom operator with 24.32% share. The combined entity of Idea-Vodafone would be around 36%, thereby becoming India’s largest telecom company by market share.
Airtel would be clearly in trouble as their numero-uno position in India would shake and stir, and they will slip to #2 position. On the other hand, Jio is raking up numbers to claim #2 position in the ranking. Within 4 months of their operations, Jio has already built a solid customer case of 7.2 crore, and they have pledged to invest $4.4 billion in the next 12 months to expand their presence and to improve infrastructure.
Operator Subscriber Numbers (Oct 2016)
| Sr. No | Telecom Operator | Total Subscriber Count (in Mln, till Oct 2016) | New Subscriber Additions since Jan 2016 ( in Mln) |
| 1 | Bharti Airtel | 262,267,596 | 18.975 |
| 2 | Vodafone | 201,900,901 | 8.297 |
| 3 | Idea Cellular | 185,153,929 | 13.239 |
| 4 | Reliance Communication | 86,167,084 | -14.725 |
| 5 | BSNL | 94,952,784 | 12.441 |
| 6 | Aircel | 90,344,161 | 4.705 |
| 7 | Tata | 55,700,811 | -5.204 |
| 8 | Telewings / Telenor | 53,264,664 | 2.513 |
| 9 | Reliance Jio | 35,611,874 | 35.611 |
Analysts have predicted that Idea-Vodafone merger would change the telecom industry forever, as this would be the biggest shake-up of the industry ever since Jio was introduced.
$26 billion Indian telecom sector is clearly up head for some exciting times. We will keep you updated as more details come in..