Analysis of Idea Vodafone Merger

1. ANALYSIS OF IDEA
VODAFONE MERGER

2. Introduction
• Vodafone Idea Limited is an Aditya Birla Group and Vodafone Group
partnership.
• It is India’s leading telecom service provider.
• The Company provides pan India Voice and Data services across 2G, 3G
and 4G platform.
• With the large spectrum portfolio to support the growing demand for data
and voice, the company is committed to deliver delightful customer
experiences and contribute towards creating a truly ‘Digital India’ by
enabling millions of citizens to connect and build a better tomorrow.
• The Company is developing infrastructure to introduce newer and smarter
technologies, making both retail and enterprise customers future ready
with innovative offerings, conveniently accessible through an ecosystem of
digital channels as well as extensive on-ground presence.
• The Company is listed on National Stock Exchange (NSE) and BSE in
India.

3. • Vision - Create world class digital experiences to connect and
inspire every Indian to build a better tomorrow.
• Mission –
1. Customers - Be the most loved brand by continuously raising the bar in
delivering simple, delightful experience and meaningful innovations,
through new age technologies.
2. Team - Be an inspirational, agile and exciting organization that
challenges status quo, and champions a diverse team that has a winning
attitude and thrives on delivering customer excellence.
3. Shareholders - Be the most valued company through smart leadership
committed to delivering sustainable growth, while adhering to the highest
standards of government and compliance
4. Community - Be the most respected company by leveraging technology
and purposeful innovation to catalyse social prosperity, digital literacy
and inclusivity.

4. Type of Merger –
• Idea Vodafone merger type is Horizontal Merger which refers to a merger
or business consolidation that occurs between firms that operate in the
same industry.
• Competition tends to be higher among companies operating in the same
space, meaning synergies and potential gains in market share are much
greater for merging firms.
• This type of merger occurs frequently because of larger companies
attempting to create more efficient economies of scale.

5. Life Cycle of Idea & Vodafone
• Both the companies in terms of life cycle were on decline stage when
JIO took over the market.
• Currently both the companies post merger are looking for market
stabilization which is maturity stage where they can defend the
market share and attain profit.

6. Motives of Merger
• The main reason for the Vodafone-Idea merger was to tackle the
rising dominance of Reliance Jio in the Indian Tel’ sector. This will
result in a brutal price war between all the major companies in this
sector.
• While merging companies are typically quite confident about their
synergy benefits, most analysts agree the Vodafone-Idea merger
holds the potential for significant cost savings. With a larger scale and
elimination of duplicate 'margins can rise substantially.
• Thus, we can say that the motive of merger was creating value.

7. Synergies
• Synergy refers to the value addition made when two or more
entities merge to create a new entity and expand opportunities
and possibilities beyond what was available to the independent
entities.
• Financial Synergy –
Financial synergy is created through higher cash flows or through the
lowering of the cost of the capital.
Vodafone has announced that it expects synergy benefits to the tune of
$10 billion in NPV terms after integration of costs and spectrum
liberalisation payments and an estimated $2.1 billion of savings by the
fourth year of completion.
The Indian telecom market conditions do not appear conducive, but
Vodafone has a good track record in other jurisdictions.

8. • Operating Synergy –
 Operating synergy is created by increase in income through the use of
existing assets.
In the Vodafone-Idea merger, we will see the development of economies of
scale, primarily due to the horizontal nature of the merger, resulting in a more
cost-efficient entity.
 The major cost and capex synergies would revolve around network
infrastructure, working efficiencies, lower maintenance expenses, energy cost
savings, redeployment of overlapping equipment from rationalised sites,
service centres, back office and distribution efficiencies, streamlining regional
and nationwide IT systems and evolving to a single IT system besides
optimising costs.

9. Swap Ratio & Valuation
• The implied swap ratio is 1:1 and it is based on Idea's price of Rs 72.5
a unit. The implied enterprise value is Rs 82,800 crore for Vodafone
India and Rs 72,000 crores for Idea.

11. THANK YOU !!
- Mahima Singh
- BBAG17075