Idea Vodafone Merger BY Manju B BBA GEN SEM 6

IDEA-
VODAFO
NE
MERGER
INTRODUCTION
•On 20th March, 2017 Board of Directors of Vodafone India and Idea
jointly announced the merger approval of the merger was given by
Department of Telecommunication in July 20l8.
•On 31st August 2018, the merger was completed and the Board of
Directors decided to name their newly merged entity as Vodafone Idea
Ltd.
•The merger includes different percentage of shares for Vodafone and
Idea while the rest belongs to the public shareholders.
•It is a Horizontal Merger
•The merger was done to eliminate competition ad to stand

against Reliance Jio (country’s largest 4G network) owned by Mr
Mukesh Ambani.
•Approximately Vodafone will have 45.1% of the shares after passing

the remaining 4.9% to Aditya Birla group for 3,900 crore post the
completion of merger.
•This transaction required various approvals from government

authorities Bank of India among including SEBI, dept. of telecom
LIFECYCLE OF THE
COMAPNIES IDEA
VODAFONE
•Vodafone is one of the world •Idea cellular limited is a Public
leading telecommunication limited company, headquartered
companies, it was founded in in Mumbai, India.
year 1985 and is based in •Idea cellular is the third largest
London Indian mobile operator in terms
•It came to India in September of number of customers it serves
2007 offering to its client 2G, 3G and
4G mobile services
•Value during the merger Rs
•Value during the merger Rs
82,800 crore
72,200 crore
• The companies were in the Stage of market maturity and
Deceleration of growth (Decline), which is why the merger was done
to eliminate competition, exploit synergy and survive in the market
MOTIVES OF MERGER-
•Vodafone and Idea will both have annual savings of Rs 14000 crore in terms of
operating expenditure and capital expenditure which will be achieved by
fourth full year of operation from the date of merger as combined entity.
•The merged entity will leverage Idea’s leadership in semi-urban and rural
telecom markets and Vodafone India’s strong presence in metro cities to serve
pan-India audience and allow for nationwide leadership within Indian
guidelines of mergers and Acquisition.
•The merger will help in growing the business of the companies thereby
increasing the market value of the shares owned by the shareholders and all
other stakeholders.
•With this merger a reduction in number of players in market would be
witnessed thereby increasing the ability to compete in market more
ADVANTAGES
•People who are using Idea and Vodafone sim can expect better network coverage in cities and
towns.
•Consumers can expect more diverse services and access to newer and smarter technology like
VoLTE, Digital wallets and internet of things after the merger.
•This merger will create India’s biggest telecom service provider having a customer base of over
394 billion. Which is more than that of Airtel who is having 263.35 million mobile subscribers.
•It will have 35% market share, a 41% revenue market share Vodafone and Idea presently are
the second and third largest telecom operators, respectively, in the Indian telecom industry
after the merger of these two entities they would emerge as an industry leader replacing Bharti
Airtel.
•Initiatives based on the renewal of price discipline for the disruptive entry by Jio has caused
some serious misbalance
•With the financial health of the sector being at its worst phase the merger of both the
companies Idea and Vodafone will help them to overcome their debts and large sum of credits
will be infused in the system.
CHALLENGES
•Integration of management of both the organisations will have to cope with
cultural differences i.e. staff working with a foreign MNC versus a home
grown firm.
•Vodafone Idea have at least 6 markets –Maharashtra, Gujarat, Kerala,
Haryana, Madhya Pradesh and west Bengal where there combined revenue
market would exceed 50% hence they will need to bring down its revenue
market share below 50% as per M&A rules within a period of one year from
the date of consolidation.
•In terms of spectrum limits, the combined entity will exceed the limit of
25% in four circles-namely Gujarat, Haryana, Maharashtra and Kerala this
excess spectrum is needed to be sold to comply with M&A guidelines within
one year from the date of merger
FINANCIAL PERFORMANCE
ANALYSIS OF SYNERGY
TARGETS
EXPECTED- The MERGERED entity expected to extract a synergy benefits worth Rs 670 billion
for cost and capital expenditure & Rs 140 billion operating expenses by the 4th year.
ACTUAL-
•To analyse the financial performance of the sample case during post-merger period it has been
observed that company’s turnover during quarter 3 went up by 53.52%.
•EBITDA increased from 461 crore in Q2FY19 to 1136.90 crore in Q3FY19. EBITDA margin
increased from 6.02% to 9.67% during the same period.
•There has been a decline in profit after tax by –0.56% on account of high finance cost,
integration cost, and mobile tower exit charges.
•Additionally, the major reason of declining profit is due to the intense competition in the market
which is because of the competitive tariff being offered by Reliance JioInfocomm limited.
•According to the CEO of the merged entity Mr Balesh Sharma the company is working well on
track to deliver its synergy targets by FY 2021.
•Further notwithstanding the losses incurred by the company, it is said to raise Rs11000 crore
from Vodafone group and Aditya Birla group and infuse the total Rs 25000 in the firm to ensure
that company has sufficient balance sheet flexibility to successfully execute its strategy
SOME OTHER CHARTS
SHAREHOLDINGS OF THE
MERGER
Vodafone: 45.1% - 9.5%: 3 5.6% Idea: 260/o + 95% : 35.6%
THANK
YOU
BY-
MANJU BAGRIYA
BBA GEN
SEM 6

Idea Vodafone Merger BY Manju B BBA GEN SEM 6

Uploaded by

Copyright:

Available Formats

Idea Vodafone Merger BY Manju B BBA GEN SEM 6

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Idea Vodafone Merger BY Manju B BBA GEN SEM 6

Uploaded by

Copyright:

Available Formats

IDEA-

•The merger was done to eliminate competition ad to stand

•Approximately Vodafone will have 45.1% of the shares after passing

•This transaction required various approvals from government

You might also like