Idea Cellular to merge with Vodafone; Stock plunges after upbeat

Idea Cellular to merge with Vodafone; Stock plunges after upbeat start

Last Updated: Mon, Mar 20, 2017 19:32 hrs
Idea - Vodafone

Telecom stock Idea Cellular started off on a high note Monday morning, rising to Rs 123.75 in a flash, gaining almost 15% in the process, but retreated from that high swiftly and then plunged into the red to Rs 92, falling nearly 30% from the highs, before closing the day at the Rs 97.60.

At Rs 97.60, the stock ended down 9.55% from its previous closing price. On BSE, the Idea Cellular counter has clocked a volume of around 27.19 million shares so far in the session, nearly 12 times its average daily volume of 2.3 million shares. On the National Stock Exchange, the counter has clocked a volume of around 20.08 crore shares so far in the session.



The hectic activity at the Idea Cellular counter happened on the back of an announcement from the company that its board of directors have approved a scheme of amalgamation of Vodafone India (VIL) and its wholly owned subsidiary Vodafone Mobile Services (VMSL) with Idea Cellular subject to receipt of necessary approvals of shareholders, creditors, Sebi, stock exchanges, the Competition Commission of India, the Department of Telecommunications (DoT), the Foreign Investment Promotion Board, the Reserve Bank of India and other governmental authorities and third parties.

Post implementation of the scheme, the entire business of VIL and VMSL (excluding VIL's investment in Indus Towers, its international network assets and information technology platforms) will vest in Idea Cellular.

Vodafone India's networth is pegged at Rs 12855 crore and its turnover is Rs 5025 crore. Vodafone Mobile Services has a net worth of Rs 3737 crore and turnover of Rs 40378 crore, while Idea Cellular has a net worth Rs 24296 crore and turnover of Rs 36000 crore.

The proposed amalgamation will result in creation of largest Indian telecom operator with widest mobile network in the country and pan India 3G/4G footprint, and will provide sufficient spectrum to complete with major operators in the market while offering innovative and attractively priced mobile service to customers.  Further, the merger will result in substantial cost and capex synergies creating value for shareholders.

As per the scheme of amalgamation, Idea Cellular will transfer 47% of the post issue paid-up capital of the company on a fully diluted basis to VIL. And then, on the amalgamation of VIL with Idea Cellular, the shares issued to VIL pursuant to the amalgamation of VMSL with Idea Cellular shall stand cancelled and, post such cancellation, Idea Cellular shall issue an aggregate number of equity shares of Idea Cellular equal to 50% of the post issue paid up capital of Idea Cellular to the shareholder of VIL.

Vodafone will own 45.1% of the combined company after transferring a stake of approximately 4.9% to the promoters of Idea and their affiliates for Rs 3874 crore in cash. The promoters of Idea will hold 26% of the company and the balance will be held by the public.


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