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Idea and Vodafone Merger: A saga of

becoming India’s Largest Telecom Company


By Nidhi Gupta

Mar 27, 2017 12:30 IST

Indian telecom industry is witnessing one of the largest mergers ever between Vodafone India
and Idea Cellular. The deal is said to upbeat humongous player such as Reliance Jio behind. Find
out more significant details about the deal in the MBA case study and enhance your knowledge
base.

Case study is an inevitable aspect of MBA programme. The word in itself speaks about the
volume of knowledge which an MBA Aspirant needs to possess on multi-lateral issues occurring
in the business environment. These industries affect the economy of our nation and hence the
growth and well-being of the business is inter-dependent on them. In addition, MBA Case Study
also helps you gain considerable knowledge that you can use in the essay writing (WAT) and
Group Discussion (GD) round to make it to the top MBA colleges.

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
Top 10 Mergers and Acquisitions of 2015-16

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.

Reliance Jio Amazing Facts

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

The merger will surely boost the pace of the telecom sector. It has also been found that the
savings, synergies and also the spectrum will have substantial impact on the escalating growth.
There will be saving of over 60 percent of the operations cost and this will aid in improving
the quality and performance of the service through investments from the saved money.
Enhancement in network infrastructure will be observed while the operational efficiencies
have a chance to reach excellence. Moreover, the revenue market share is expected to rise for
all the locations and the spectrum of the entity would exceed the initial caps.

We hope that the MBA case study on Vodafone and Idea merger would have help you acquire
knowledgeable insights about the scenario of Indian telecom industry.

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