Contact Your Financial
Adviser Money Making MC
30 January
2017
Ending months of speculation, Vodafone on
Monday confirmed it is in talks with the Aditya Vikram Birla group for the
merger of its Indian entity and Idea Cellular in what will be the largest such
deal in the country's telecom space once it materialises. The Total Investment & Insurance
Solutions
The merger will create an entity with a subscriber
base of more than 400 million to emerge as the largest player in India,
replacing the current dominant player Bharti Airtel, which currently has over
260 million users on its network. The
Total Investment & Insurance Solutions
"Vodafone confirms that it is in
discussions with the Aditya Birla Group about an all share merger of Vodafone
India -- excluding Vodafone's 42 per cent stake in Indus Towers -- and
Idea," the Indian entity's parent company said in a statement.
"Any merger would be effected through
the issue of new shares in Idea to Vodafone and would result in Vodafone
deconsolidating Vodafone India." The
Total Investment & Insurance Solutions
In a clarification later, Idea Cellular said
it is in preliminary discussions with Vodafone.
"In view of the fact that the discussion
is at the preliminary stage, the company is not in a position to share any
further details," Idea Cellular said in a regulatory filing. The Total Investment & Insurance
Solutions
"However, it is important to mention
that the fundamental premise of preliminary discussion is based on equal rights
between Aditya Birla Group and Vodafone in the combined entity," the
company added.
Vodafone India has over 200 million
subscribers, with a presence in all the 22 circles the country has been divided
into. It intends to have 4G services in 17 circles, covering 2,400 towns, by
the end of this fiscal. The Total Investment
& Insurance Solutions
Idea, on the other hand, says it has a
similar subscriber base, also with a presence in all the 22 circles. It intends
to have 4G services in 20 circles by"March 2017.
"Given the financial pressure and
dynamics in the telecom sector consolidation is imperative. It is good for both
industr" and consumers," Rajan S. Mathews, Director General, Cellular
Operators' Association of India told IANS. The Total Investment & Insurance Solutions
Mathews said the merged entity of Vodafone
and Idea Cellular will have 43 per cent of the revenue market share. The Total Investment & Insurance
Solutions
"The merger confirms the trend towards
consolidation. It shows that the companies recognise the nature and size of the
challenge posed to their businesses by Jio. This will help both companies to
improve their competitiveness," Mahesh Uppal, Director, telecom
consultancy firm Com First told IANS.
"Going forward there will be a reduction
in number of players to four and consequently a decrease in the competition in
the sector. This is not necessarily good for consumers in the short term. In
the medium term, these consolidations will make the sector a bit a more
stable," he added.
Both Vodafone India and Idea have to figure
out their long term business strategy and merger could well be the path, given
current industry competitiveness and dynamics, said Amresh Nandan, Research
Direct"r, Gartner. The Total Investment
& Insurance Solutions
"As per our recent note, we believe that
a potential Idea and Vodafone merger could make strategic sense. However, the
merger would result in the combined entity facing practical implementation
issues, the most significant of them could be the cost associated with
liberalizing the spectrum. The combined entity would also breach spectrum caps
in 5 circles, the market value of which comes t" Rs 75 billion," said
Bank of America Merrill Lynch. The
Total Investment & Insurance Solutions
Industry speculation over a possible merger
has been doing the rounds for nearly a year and intensified after Reliance Jio
entered the market with its mega voice and data offer, with an announcement
that voice will be free on its network for life. The Total Investment & Insurance Solutions
But the Aditya Vikram Birla Group had scoffed
at media reports suggesting merger talks in their regulatory filings with the
stock exchanges, though analysts found a lot of synergies in such a move.
Earlier this month, JP Morgan spoke about the
merits of such a merger.
"This could unlock more than $9 billion
in potential synergies and offer an elegant route to deconsolidating India,
thereby helping focus (Vodafone's) attention back onto a rebounding European
equity story," the top investment banker said. The Total Investment & Insurance Solutions
As regards Idea, it said, in the migration
towards free voice regime, the company stands to be the most vulnerable. Idea
has a higher of rural and semi-urban subscribers, who are not as data-hungry as
the creamy users in metros and cities, where it has a relatively limited
presence.
Analysts also maintained that the initial
public offering by Vodafone India did not make sense.
"We believe an elegant alternative would
be for Vodafone to reverse merge into locally listed peer Idea (a deal that
offers Idea a solution to their mounting balance sheet challenges)," JM
Morgan said.
Idea Cellular's stock prices spurt at the
merger talks announcement. Its stocks closed at Rs 97.95 per share up by 25.90 per
cent at the closing time of the BSE.The
Total Investment & Insurance Solutions
No comments:
Post a Comment