Mar 20, 2017
Vodafone relies on new Idea merger to fight Jio
An hour after announcing the biggest merger in Indian corporate history, Vittorio Colao, Vodafone chief executive, sat in a Mumbai hotel ballroom, insistently denying that his hand had been forced by the global telecom sector's most aggressive new arrival. The proposed merger of UK-listed Vodafone's Indian subsidiary with its local rival Idea Cellular would create the country's largest mobile operator, with an aggregate subscriber base of 396m as of December, and a combined enterprise value of $23.2bn, according to the merger terms revealed on Monday. "We consider this merger to be a game changer for the Indian telecom industry," said Arun Agarwal, a partner at Altavista Investment Management, a shareholder in Vodafone, arguing that it would temper competition in the space. The deal terms imply an enterprise value of $12.4bn for Vodafone India and $10.8bn for Idea Cellular. Vodafone shares fell 0.6 per cent on Monday and Idea shares by 10 per cent - the latter drop reflecting investor frustration, after speculation that Vodafone would offer a takeover premium, said Chris Lane, an analyst at Bernstein.
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