Idea and Vodafone Merger: A saga ofbecoming Indias

Largest TelecomCompany

In this article we will be discussing about a huge and an

unanticipated change that is being observedin the telecom
industry between two telecom giants, i.e.
Vodafone India and Idea Cellular.
Ideacellular which is owned by Kumar Mangalam Birla have
come forward with the proposition to mergewith Vodafone India.
This would result in the biggest company considering the number
of subscriberbase catered by both the players.The merger will
leave Bharti Airtel off its hook from being the number one from
past 15 years. Thereare several aspects that are to be looked into
while developing an understanding about the featuresassociated
with merger and the impact it would make on the consumers and
the telecom industry asa 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 inthe 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. Thiswould amount to a total of
Rs. 3874 crore wherein each share is worth Rs. 108
. This would behelpful 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 buyanother 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 goforward 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 Vodafonewould appoint the chief
financial officer
. The CEO of the new entity would be named jointly by boththe
companies under a joint agreement
4.
The merger also gives the promoters of both the entities with a
right to nominate 3 members eachfor 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 themarket 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
dominatingcounterparts
in the telecom industry.2. The process of branding will be
individual for both the companies have been found to have
acomplementary 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 byJio has caused some serious
misbalance
2.
Secondly, the poor financial health of the telecom sector can be
observed and through such mergersthere will be infusion of health
and life since
India is the fastest growing market in terms of thesubscriber
base
.
3.
Through the merger, Vodafone and Idea will
overcome their debts
and large sum of credit will beinfused in the system
4.
The deal has also
saved both the telecom companies from

selling off their business

, as wasbeing planned by them initially and this would directly
impact the quality of services being provided bydifferent players in
the industry