Idea- Vodafone Merger: Consolidation in the Indian Telecom Sector
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Case Code: BSTR530 Case Length: 18 Pages Period: 1990-2017 Pub Date: 2018 Teaching Note: Available |
Price: Rs.500 Organization: Idea Cellular and Vodafone India Limited Industry: Telecom Countries: India Themes: Mergers and Acquisitions |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
The Service Provider Saga
The Indian telecommunication services market was expected to grow by 10.3 per cent year-on-year to reach US$ 103.9 billion by 2020 . The Indian telecom sector’s revenue was US$ 41.68 billion in 2015. The top Six players in the Indian wireless (mobile) service market in 2016 were Airtel, Vodafone, Idea, Aircel, RCom, and BSNL. In the wireless segment, Airtel was the market leader with a share of 24.31% in terms of total subscriptions followed by Vodafone with a share of 19.15% . There were also other small players like Telenor, MTS, BSNL, and MTNL which were either planning to exit the market or were looking for consolidation for survival...
Pricing Challenges - Entry of Reliance Jio
For the telecom operators who were grappling with high cost and debt problems, the announcement of Jio entering the telecom sector came as a huge blow. Jio had been in the making for about six years, and had acquired pan-India 4G spectrum in 2010. The test phase of the 4G network started in December 2015...
Idea-Vodafone Merger
Proving the experts true, the major telecom operators went into a consolidation mode. Airtel acquired Telenor ; business and spectrum from other smaller telecom companies like Videocon, Augere Wireless, Tikona (4G Spectrum), etc. Reliance Communications (RCom) agreed to merge with Aircel and acquire MTC; Tata Telecom was also in merger plans with RCom. Just seven months after Jio had started operations, the number of telecom operators in the country dropped to seven from twelve...
Challenges
However, the markets did not react well to the merger. After the announcement, the share price of Idea started to drop. (Refer to Exhibit-XI for Share Trading Trend of Idea). The share price declined from Rs.97.70 on March, 20, 2017, to Rs.81.80 on September 06, 2017 . Analysts were of the opinion that this would be like a three-legged race against Usain Bolt , . In other words, they felt competing against two leading brands (Airtel and Jio) with two separate brands might be challenging task...
Exhibits
Exhibit I:Market Dynamics of Indian Telecom Sector
Exhibit II: Shareholding Pattern of the Merged Entity
Exhibit III: Total Subscribers and Market Share of Merged Entity
Exhibit IV: Estimated Cost Synergies of Idea-Vodafone Merger
Exhibit V: Synergies of Idea-Vodafone Merger
Exhibit VI: Financial Synergies of Idea-Vodafone Merger
Exhibit VII: Valuation of Merged Entity
Exhibit VIII: Spectrum Share of Merged Entity
Exhibit IX: Pan India Revenue Share of Merged Entity
Exhibit X: Revenue Market Share (%) of Telecom Operators in Different Circles (October-2016 to December-2016)
Exhibit XI: Share Trading Trend of Idea
Exhibit XII: Comparative Position of Idea-Vodafone
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