Idea-Vodafone may prove bitter for Vodafone stakeholders

The proxy advisory firm Institutional Investor Advisory Services in a recent report stated that the Idea-Vodafone merger, despite creating India's largest telecom company may not be very beneficial for Vodafone stake-holders.

The report said that the Idea-Vodafone merger has been less condusive for the good of Vodafone, compared to the Aditya Birla Group on the front of influentiality. The advisory firm suggested in its report that Vodafone is the bigger company.

The advisory evaluated the deal to be more in favour of Idea, as Vodafone settled for an equal relationship in lieu of any premium or greater authority from the deal.

Furthermore, Vodafone allowed Idea's parent company, the AB Group a standstill period of three years to equalize equity stakes, besides also allowing equal voting rights before the actual equalisation of stakes.

Through the deal, Vodafone has granted a call option on 9.5 percent of equity without premium, thus enabling AB Group to acquire 9.5 percent of the merger’s shares at a pre-decided price of Rs 130 per share till the next three years, giving AB group the authority to do the valuation of the shares and the equalization of the group's holdings. Henceforth, the deal might prove to be bitter for the stareholders of Vodafone.