Bharti Airtel is presently the number one telecom industry in the country.
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Reliance Jio’s entry had also prompted Vodafone Group to inject Rs 47,700 crore ($7.1 billion) into its local unit to repay debt, purchase spectrum, expand its network and deploy new technologies. “We view this merger as a strong response, and we see Vodafone’s shares as undervalued”, said Nichols.
Vodafone and Idea on Monday confirmed that two were in talks to merger their operations in India.
Shares of other Aditya Birla Group companies listed on the exchange also spurted on the possible merger talks.
He said Idea Money is in process of being merged with the Aditya Birla-Idea Payments Bank and the differentiated banking entity will be launched this year.
The merger is important for both the struggling players.
Vodafone has confirmed it is in talks to merge its struggling Indian arm with a rival. VOD India generates c€6 billion of revenue and €1.8b EBITDA, Idea is slightly smaller with c€5.3b of revenues and c€1.6b of EBITDA.
The deal, however, could face trouble over the breach of legal spectrum limits.
The merged entity will have excessive spectrum in five circles – Maharashtra, Gujarat, Kerala, Haryana, and Uttar Pradesh (West).
The combined company would boast some 800 billion rupees ($11.76 billion) worth of revenue, compared with market leader Bharti Airtel’s more than 900 billion rupees.
At the same time, analysts say there would be a lot of synergy benefits. The unification with Idea Cellular in India makes Vodafone more powerful to compete against the Bharti Airtel and Reliance Jio.
The broader Nifty index slid by 8.50 points or 0.10 percent to close at 8,632.75, with Tata Group stocks, Aurobindo Pharma and Infratel leading decliners. Shares in Vodafone gained 3% in early trading in London.
To analyse the aftermath of this merger, Vodafone and Idea combined will then capture about 43 percent of market share beating Airtel’s current 32 percent.
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“Our analysis of a potential merger of Vodafone India with Idea Cellular reveals that such a mega deal would change the industry order”, CLSA said.
