Shares of Idea Cellular skyrocketed 52.56 per cent to hit high of Rs. 119 in the last two trading sessions.On Monday, Vodafone merges its Indian unit with Idea Cellular in a move that would create India's largest telecoms company.
"Vodafone confirms that it is in discussions with the Aditya Birla Group about an all-share merger of Vodafone India (excluding Vodafone's 42 per cent stake in Indus Towers) and Idea," Vodafone said in a statement.
"There is no certainty that any transaction will be agreed, nor as to the terms or timing of any transaction," the statement added.
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A merger between Vodafone India and the Mumbai-based Idea Cellular would turn India's multi-billion dollar telecommunications market on its head, according to global brokerage firm CLSA.
Domestic brokerage Edelweiss in a note to its clients said, "The combined entity will have a subscriber base of 382.2 million subscribers with 35.4 per cent subscriber market share and it will have 42 per cent revenue market share (RMS)."
"It will also have concentrated spectrum portfolio with 36.5 percent of the liberalized spectrum in the 1800MHz band, enabling it to deploy higher spectrum per site resulting in higher revenue productivity per site," said Edelweiss.
The report says that the consolidation of Vodafone and Idea Cellular is unlikely to bring down competition in the telecom industry. It says, "We believe that consolidation is unlikely to result in a reduction in competitive intensity as Reliance Jio will continue to disrupt market till it gains volume market share proportionate to its capacity market share."
Maintaining a cautious stance on the telecom sector, Edelweiss added, "We expect competitive intensity in remaining circles to stay elevated as data capacity utilization remains low and Reliance Jio (RJIO) aspires to gain market share. We recommend the switch from Bharti Airtel to Idea Cellular due to possible synergy benefits for the latter. Maintain cautious stance on the sector."
Shares of Idea Cellular ended 13 per cent higher at Rs. 110.
