Info-tech

Vodafone-Idea merger: Minority shareholders have much to gain, say analysts

Tanya Thomas Mumbai | Updated on January 15, 2018

The Vodafone-Idea marriage will be net-positive for the minority shareholders of the publicly listed Idea, according to a host of analysts and industry observers that BusinessLine spoke to. Don’t go by just the battering that the Idea stock took on Monday, they cautioned.

Idea closed at ₹97.60 on the BSE on Monday, losing 9.55 per cent after the details of the merger were announced by the two telecom companies earlier in the day. The merged entity will have a subscriber market share of close to 36-37 per cent and revenue market share of close to 41-42 per cent.

Vodafone India’s enterprise value is $12.4 billion and that of Idea is $10.8 billion, minus its stake in Indus Towers.

Mayuresh Joshi, Fund Manager, Angel Broking, said: “If you look at debt getting transferred to the combined entity, Idea’s is ₹52,700 crore and that of Vodafone is ₹55,200 crore. To that extent, I don’t know how accretive this deal is going to be to minority shareholders. But they will also have to look at the proposed merger and the combined earnings and synergies the new entity will have.

“The companies have said that the consolidation of network sites will lead to savings to the tune of almost $2.1 billion on an annualised basis. Add to this the monetisation of tower assets, and over the long term, investors will benefit. I think the deal has been fairly valued.”

Shriram Subramanian, MD of proxy advisory InGovern, agreed that Idea’s public investors stand to benefit. “At the end of the day, it is the scenario of the future that matters. The going was getting difficult with Jio being so aggressive. In fact, I think this is a good way out for both Idea and Vodafone. The consolidation is a relief for Idea’s shareholders, for whom otherwise, the future had seemed bleak,” he said.

Joshi added: “The value of the proposed merger entity was tentatively pegged at ₹72 when the deal was getting worked out. But once the merger is complete, both companies can start alleviating debt and investors stand to benefit when it happens.”

Published on March 20, 2017

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