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Idea and Vodafone Merger: A saga of

becoming Indias Largest Telecom


Company
In this article we will be discussing about a huge and an unanticipated change that is being observed
in the telecom industry between two telecom giants, i.e. Vodafone India and Idea Cellular. Idea
cellular which is owned by Kumar Mangalam Birla have come forward with the proposition to merge
with Vodafone India. This would result in the biggest company considering the number of subscriber
base catered by both the players.

The merger will leave Bharti Airtel off its hook from being the number one from past 15 years. There
are several aspects that are to be looked into while developing an understanding about the features
associated with merger and the impact it would make on the consumers and the telecom industry as
a whole.
Key Highlights of Vodafone-Idea Merger

The merger will give a higher stake to the promoters of Idea as compared to Vodafone India so that in
the long run both the companies are able to gain access to equal hold

1. The first step for AB group would be the acquisition of 4.9 percent of shares from Vodafone. This
would amount to a total of Rs. 3874 crore wherein each share is worth Rs. 108. This would be
helpful in increasing the share holding capacity of Idea to 26 percent

2. While Vodafone holds 45.1 percent of the shares in the merger, Idea would be allowed to buy
another 9.6 percent but at a cost of Rs. 130 per share in the period spread over next four years.
However, if Idea is unable to come up equal to the shareholding percentage of Vodafone, it can go
forward and buy the number of shares required further but at the price prevailing in the market

3. The chairman of the new combined entity would be Kumar Mangalam Birla while Vodafone
would appoint the chief financial officer. The CEO of the new entity would be named jointly by both
the companies under a joint agreement

4. The merger also gives the promoters of both the entities with a right to nominate 3 members each
for the board. There would be a total of 12 members on the board of which 6 would be independent.
Significance of the Merger for Consumers

The merger holds significance for the consumers also, as a rapid change can be expected in the
market organisation and the telecom industry development.

1. The Indian telecom industry would see the domination of three telecom giants of which Vodafone-
Idea would be the largest. Additionally, Bharti Airtel and Jio have been found as the dominating
counterparts in the telecom industry.
2. The process of branding will be individual for both the companies have been found to have a
complementary nature with respect to each other.

Impact of Merger on Telecom Industry

There are also several other implications that this merger will bring forth on the telecom industry.

1. Firstly, there can be initiatives based on the renewal of price discipline for the disruptive entry by
Jio has caused some serious misbalance

2. Secondly, the poor financial health of the telecom sector can be observed and through such mergers
there will be infusion of health and life since India is the fastest growing market in terms of the
subscriber base.

3. Through the merger, Vodafone and Idea will overcome their debts and large sum of credit will be
infused in the system

4. The deal has also saved both the telecom companies from selling off their business, as was
being planned by them initially and this would directly impact the quality of services being provided by
different players in the industry