Decoding Idea-Vodafone merger

The mega merger between Idea and Vodafone would create a monolithic corporate entity in the telecom space in terms of revenues and active subscriber base. The merger is likely to be completed within 24 months, that is in 2018, subject to approvals from shareholders, creditors, stock exchanges, SEBI, the telecom department and Competition Commission of India.

Post-merger, the shareholding pattern of the combined entity would be as follows. Vodafone will own 45.1 per cent after transferring 4.9 per cent to the promoters of Idea Cellular for Rs 38,740 crore in cash post the merger. Kumar Mangalam Birla and other promoters of Idea Group will hold 26 per cent and the rest will be owned by the public.

Aditya Birla Group will have the right to buy 9.5 per cent stake in the entity at Rs 130 per share. There will be three directors from each Aditya Birla Group and Vodafone and six independent directors.

As per broking firm CLSA, the merged entity will have revenue of more than Rs 80,000 crore, giving it a 43 per cent market share by topline and a 40 per cent market share by active subscriber base. The combined entity will account for over 25 per cent of allocated spectrum and will have to sell about one per cent to comply with spectrum cap norms.

The valuation of Idea after the merged entity would be as follows: The company’s 21.1 per cent shareholding at Rs 72.5, another 4.9 per cent at Rs 108 per share and 9.5 per cent at a price of Rs 130.

The mega merger had the stock market abuzz today, with Idea's parent company Aditya Birla Nuvo witnessing a roller-coaster ride.