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Case Study on Merger of Idea and Vodafone
What is Merger?
A Merger is a corporate strategy of combining different
companies into a single company in order to enhance
the financial & operational strengths of the
organization.
Merger are commonly done to expand a companies
reach, expand into new segments or gain market share.
A merger is the voluntary fusion of two companies on
broadly equal terms into one new legal entity.
The five Major types of mergers are conglomerate,
congeneric, market extension, horizontal, and vertical
Overview of the Telecom Industry
Overview: Telecom Industry
1. The telecom market split into three segments
• Mobile (Wireless)
• Fixed Line (Wired)
• Internet Services
2. Telecom Subscriber base expand substantially
3. Surging telecom revenues
4. Wireless segment dominates the market
5. Internet subscribers increasing at a fast face
Disruption By Jio
 Reliance acquired 95% stake in Infotel in 2010
 Jio started operations on September 5, 2016
 Invested over 1.9 lakh crore
 Disrupted the market by manipulating TRAI (Telecom
Regulatory Authority of India)- framed guidelines
 Price cuts and ensuring price war
 4G VoLTE voice call revolution
 JioFiber- Disrupting the wired broadband sector
 Jio Phone – Creation of new 4G ‘Smart Feature’ phone segment
Merger of Idea and Vodafone India
Benefits For All Stakeholders
Realizing the ‘Digital India’ Vision
 Accelerate the availability of high-speed mobile
broadband services through India
 Support sustained investment to create a ‘World
Class’ telecom Infrastructure
 Stronger financial inclusion through mobile
payments
 Improved mass-market digital services in urban
and rural areas
Delivering benefits for Consumers
 Excellent consumer experiences
 Offer attractively priced services and
innovative products in a competitive telecom
market
 Best-in-class National & International
Roaming experience
 Better offerings for Enterprises across the
country
Creating Value for shareholders
 Creating a stronger listed business with a deep spectrum position- Accretive
transaction
 Improved Return on capital from higher scale. Substantial Opex & Capex
synergies
 Synergy benefits to enable faster de-leveraging of balance sheet
 Improvement in overall consumers ARPU levels due to higher adoption of
broadband and digital services
Need of Merger
• The need of merger arises to get full benefits of the synergy and with synergy
benefit it results in higher profits and leverage expected to reduced, the
combined entity’s equity valuation also rises.
• Also the market share and the number of customer also increased through this
mergers which ultimately provide boost in the revenue of both of the firms.
• It is also helps in reducing the effect of tariff war that generally occur in the
Telco industry.
• Also with this merger both company enjoy benefits in term of network and
also in term of services.
• To become biggest Telco sector in India this merger is required
Vodafone & Idea:The Largest Indian Tele Company
1 Largest telecom operator:
#1/#2 RMS in 21 out of 22 circles
2 Highly complementary footprint and
coverage
• Metro, urban and rural Markets
• Broadcast coverage: 273K 2G sites, 189K 3G/4G sites
3 Competitive spectrum portfolio and
broadband coverage
• 1850MHz, premium 900 MHz in 17 circles
• 163 3G/4G carriers, up to 250mbps in 12 circles
Vodafone & Idea:The Largest Indian Tele Company
4 Extensive distribution channels and
unparalleled service infrastructure
• Over 2 million retailers
• 19k branded stores and 28k contact centre agent
5 Full digital services to Indian consumers
and businesses
• Mobile payments, lo T, advanced enterprises offerings and
entertainment services
6 Substantial costs and capex synergies
• Estimated NPV of US$ 10Billion
• $2.1 Billion run rate in 4th year
Vodafone and Idea Post Completion
Idea 26% Public 28.9% Vodafone 45.1%
Merged
Mobility
• Both Mobility
businesses
Towers
Standalone Towers (tenancies)
• Idea: 8,886 (15,418)
• Vodafone: 10,926 (15,846)
o Idea’s 11.18% stake in Indus
Payments Bank
• Idea Money
• Vodafone M-Pess
• Aditya Birla Idea
Payments Bank
Other Subs/JVs
• You Broadband
• Firefly Networks
• Other Subsidiaries
Indus Tower 42%
• Aditya Birla Group to acquire 4.9% stake of merged entity from Vodafone for – INR 39bn in cash, concurrent with
completion – reaching a shareholding of 26%
• Aditya Birla Group has the right to acquire up to 9.5% additional shareholding from Vodafone Group
• Capital towers and Idea’s 11.15% stake in Indus Towers to be monetized to unlock value
Aditya Birla Group and Vodafone: A Strong Partnership
Aditya Birla Group Vodafone India
Leading Conglomerate
• One of the India’s most respected and
largest conglomerate with over 150
years of heritage
• Aggregate revenues of US$ 41bn
Diversified Profile
• Proven track- record of building
leadership businesses across diverse
industries including telecom, metals,
cement, retail, fashion & lifestyles,
financial services, etc.
Global Presence
• Operations across 30+ countries
• Large and diverse manpower of over
1,20,000 employees
Enterprises
• Leader in enterprise mobility
internationally, offices in 73 countries
• Global Market leader internet of Things
(loT)
Technology
• Key shaper of technology standards,
chairman of the NGMN alliance
• Expertise in mobile payments (M-Pesa)
Procurement
• Best-in-class purchasing capability
reflecting leading multi-country scale
Largest Customer Base with a Competitive Spectrum
Portfolio
205
320
205 191 183
100 72 53
191
CUSTOMERS As at Q3 FY 2017
(Million)
958
1489
1235
964 958 891 883
387
891
SPECTRUMS
Total spectrum holdings post
Oct-2016 auction (MHZ)
Customer Market Share (Q3 FY 2017) Share of Spectrum (Oct-2016)
Challenges to Merged Entity
 Operational integration – tough and costly
call
 Consolidation of ecosystem partners
 Seamless execution to counter Jio’s market
disruptive moves
 Differ significantly in terms of billing
systems, network vendors and culture
 Realignment of existing agreements and
contracts.
 Complex and costly termination of existing
contracts
 Different IT, CRM, Tower partners &
equipment providers
 Integrating marketing teams
 Adjusted market revenue share >50% in 7
circles
 Average Spectrum market share 20% but
breaching 25% in 3 circles
 Subscriber market share cap of 50%
breached in 2 circles
 Brand identity: Idea vs Vodafone
 Organisational Challenges
 Human Resource Management
 Unequal partnership
 Higher Capex to compete effectively with
Jio and Airtel

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Case study on merger of Vodafone and Idea (VI).pptx

  • 1. Case Study on Merger of Idea and Vodafone
  • 2. What is Merger? A Merger is a corporate strategy of combining different companies into a single company in order to enhance the financial & operational strengths of the organization. Merger are commonly done to expand a companies reach, expand into new segments or gain market share. A merger is the voluntary fusion of two companies on broadly equal terms into one new legal entity. The five Major types of mergers are conglomerate, congeneric, market extension, horizontal, and vertical
  • 3. Overview of the Telecom Industry Overview: Telecom Industry 1. The telecom market split into three segments • Mobile (Wireless) • Fixed Line (Wired) • Internet Services 2. Telecom Subscriber base expand substantially 3. Surging telecom revenues 4. Wireless segment dominates the market 5. Internet subscribers increasing at a fast face
  • 4. Disruption By Jio  Reliance acquired 95% stake in Infotel in 2010  Jio started operations on September 5, 2016  Invested over 1.9 lakh crore  Disrupted the market by manipulating TRAI (Telecom Regulatory Authority of India)- framed guidelines  Price cuts and ensuring price war  4G VoLTE voice call revolution  JioFiber- Disrupting the wired broadband sector  Jio Phone – Creation of new 4G ‘Smart Feature’ phone segment
  • 5. Merger of Idea and Vodafone India Benefits For All Stakeholders Realizing the ‘Digital India’ Vision  Accelerate the availability of high-speed mobile broadband services through India  Support sustained investment to create a ‘World Class’ telecom Infrastructure  Stronger financial inclusion through mobile payments  Improved mass-market digital services in urban and rural areas Delivering benefits for Consumers  Excellent consumer experiences  Offer attractively priced services and innovative products in a competitive telecom market  Best-in-class National & International Roaming experience  Better offerings for Enterprises across the country Creating Value for shareholders  Creating a stronger listed business with a deep spectrum position- Accretive transaction  Improved Return on capital from higher scale. Substantial Opex & Capex synergies  Synergy benefits to enable faster de-leveraging of balance sheet  Improvement in overall consumers ARPU levels due to higher adoption of broadband and digital services
  • 6. Need of Merger • The need of merger arises to get full benefits of the synergy and with synergy benefit it results in higher profits and leverage expected to reduced, the combined entity’s equity valuation also rises. • Also the market share and the number of customer also increased through this mergers which ultimately provide boost in the revenue of both of the firms. • It is also helps in reducing the effect of tariff war that generally occur in the Telco industry. • Also with this merger both company enjoy benefits in term of network and also in term of services. • To become biggest Telco sector in India this merger is required
  • 7. Vodafone & Idea:The Largest Indian Tele Company 1 Largest telecom operator: #1/#2 RMS in 21 out of 22 circles 2 Highly complementary footprint and coverage • Metro, urban and rural Markets • Broadcast coverage: 273K 2G sites, 189K 3G/4G sites 3 Competitive spectrum portfolio and broadband coverage • 1850MHz, premium 900 MHz in 17 circles • 163 3G/4G carriers, up to 250mbps in 12 circles
  • 8. Vodafone & Idea:The Largest Indian Tele Company 4 Extensive distribution channels and unparalleled service infrastructure • Over 2 million retailers • 19k branded stores and 28k contact centre agent 5 Full digital services to Indian consumers and businesses • Mobile payments, lo T, advanced enterprises offerings and entertainment services 6 Substantial costs and capex synergies • Estimated NPV of US$ 10Billion • $2.1 Billion run rate in 4th year
  • 9. Vodafone and Idea Post Completion Idea 26% Public 28.9% Vodafone 45.1% Merged Mobility • Both Mobility businesses Towers Standalone Towers (tenancies) • Idea: 8,886 (15,418) • Vodafone: 10,926 (15,846) o Idea’s 11.18% stake in Indus Payments Bank • Idea Money • Vodafone M-Pess • Aditya Birla Idea Payments Bank Other Subs/JVs • You Broadband • Firefly Networks • Other Subsidiaries Indus Tower 42% • Aditya Birla Group to acquire 4.9% stake of merged entity from Vodafone for – INR 39bn in cash, concurrent with completion – reaching a shareholding of 26% • Aditya Birla Group has the right to acquire up to 9.5% additional shareholding from Vodafone Group • Capital towers and Idea’s 11.15% stake in Indus Towers to be monetized to unlock value
  • 10. Aditya Birla Group and Vodafone: A Strong Partnership Aditya Birla Group Vodafone India Leading Conglomerate • One of the India’s most respected and largest conglomerate with over 150 years of heritage • Aggregate revenues of US$ 41bn Diversified Profile • Proven track- record of building leadership businesses across diverse industries including telecom, metals, cement, retail, fashion & lifestyles, financial services, etc. Global Presence • Operations across 30+ countries • Large and diverse manpower of over 1,20,000 employees Enterprises • Leader in enterprise mobility internationally, offices in 73 countries • Global Market leader internet of Things (loT) Technology • Key shaper of technology standards, chairman of the NGMN alliance • Expertise in mobile payments (M-Pesa) Procurement • Best-in-class purchasing capability reflecting leading multi-country scale
  • 11. Largest Customer Base with a Competitive Spectrum Portfolio 205 320 205 191 183 100 72 53 191 CUSTOMERS As at Q3 FY 2017 (Million) 958 1489 1235 964 958 891 883 387 891 SPECTRUMS Total spectrum holdings post Oct-2016 auction (MHZ) Customer Market Share (Q3 FY 2017) Share of Spectrum (Oct-2016)
  • 12. Challenges to Merged Entity  Operational integration – tough and costly call  Consolidation of ecosystem partners  Seamless execution to counter Jio’s market disruptive moves  Differ significantly in terms of billing systems, network vendors and culture  Realignment of existing agreements and contracts.  Complex and costly termination of existing contracts  Different IT, CRM, Tower partners & equipment providers  Integrating marketing teams  Adjusted market revenue share >50% in 7 circles  Average Spectrum market share 20% but breaching 25% in 3 circles  Subscriber market share cap of 50% breached in 2 circles  Brand identity: Idea vs Vodafone  Organisational Challenges  Human Resource Management  Unequal partnership  Higher Capex to compete effectively with Jio and Airtel