Download to read offline
More Related Content
Similar to Vodafone & Idea merger
Vodafone & Idea merger
- 1. Critical Appraisal ofVodafone & Idea Merger Name: Alankriti Parita Course: BBA Sem 6 Roll No: BBAG17044
- 2. What is aMerger? • A merger is an agreement that unites two existing companies into one new company. • There are several types of mergers and also several reasons why companies complete mergers. • Mergers and acquisitions are commonly done to expand a company’s reach, expand into new segments, or gain market share. All of these are done to increase shareholder value.
- 3. Which type ofmerger is of Vodaphone and idea? • A horizontal merger occurs between companies operating in the same industry. The merger is typically part of consolidation between two or more competitors offering the same products or services. • Such mergers are common in industries with fewer firms, and the goal is to create a larger business with greater market share and economies of scale since competition among fewer companies tends to be higher. • Vodafone & Idea Merger is a horizontal merger as both companies are in the same line of business. Vodafone merged with Idea to Create a large business and to have greater market share.
- 4. Product Life Cycleof Vodafone
- 5. • Growth stage,company’s sales and profits starts increasing and competition also begin to increase. The product becomes well recognized at this stage and some of the buyers repeat the purchase patterns. During this stage, firms focus on brand preference and gaining market share. • Vodafone is in the growth stage of product life cycle as day by day they are coming out with new service and product. They are looking for new market and creating new one. The market is not saturated in terms of service. Vodafone was doing innovation continuously.
- 6. Product Life Cycleof IDEA
- 7. • At maturitystage, brand awareness is strong so sale continues to grow but at a declining rate as compared to past. At this stage, there are more competitors with the same products. So, companies defend the market share and extending product life cycle, rather than making the profits, By offering sales promotions to encourage retailer to give more shelf space to the product than that of competitors. • Idea was in maturity growth of product life cycle. Idea brand awareness was strong so they have continuous growth but they have declined rate as compared to past. Idea was defending its market share rather than making the profits.
- 8. Motive of Vodafone Idea Merger Improvedinfrastructure to provide superior service • The biggest impact of this merger will arguably be seen in the improvement of telecom infrastructure that currently exists in the country. Since the entry of Reliance Jio back in 2016, the telecom sector has improved greatly in terms of connectivity. • This merger should help Vodafone Idea Limited provide better service in terms of both connectivity and quality. • Vodafone Idea Limited, with a wide spectrum portfolio of about 1,850 MHz, and the largest voice network with over 2 lakh GSM towers and about 2.35 lakh kms of fibre connectivity, should provide "superior voice and broadband connectivity across the country" and cover as much as 92 per cent of the population by reaching nearly 5,00,000 towns and villages.
- 9. Improved tariffs • Sinceits entry into the market in November 2016, Reliance Jio has caused a shake-up that has seen India become one of the most affordable markets for availing telecom services. Jio started a price war upon its entry that eventually led to mobile tariffs tumbling drastically. • With Vodafone Idea Limited stepping into the ring, things may just get even better for the end consumers. • Despite the merged entity carrying a debt of thousands of crores, existing customers of Idea and Vodafone can expect to be offered superior services at much aggressive price points, which would, in turn, see Jio and Airtel indulge the new telecom operator in another round of price cuts and tariff justment to fend off competition.
- 10. The fight forthe future • Apart from providing better services at more affordable tariffs, the merged entity should also help the Indian telecom sector improve adoption of state of the art technologies, and hasten the move towards the next big thing in telecom, 5G. • With a broadband network (3G+4G) of over 340,000 sites, Vodafone Idea Limited will cater to a staggering 840 million subscribers across the country and give Jio and Airtel a good run for their money in the space. • However, that's not just where the company plans to stop. With its pooled resources, Vodafone Idea Limited will be better placed to not only improve 4G connectivity but also upgrade its network to 5G in the years to come.
- 11. Vodafone Idea MergerSynergies • Vodafone idea said its merger integration is moving ahead of plan and the telco will be able to unlock the synergies worth ₹14,000 crore by FY21 rather than earlier estimated FY23. • “Original synergy target brought forward by two years — ₹14,000 crore of run-rate costs and capex synergies (₹8,400-crore opex and ₹5,600-crore capex) on an annual basis by the second full year post completion,” PARTICULARS AMOUNT (RS CRORE) Rental and Energy Cost 4,900 IT 300 Network Cost 300 Acquisition, Servicing and Advertising 1,200 Total 6,700
- 12. Vodafone Idea EbitdaErosion Offsets Synergy Gains
- 13. Valuation Methodology • Kumar MangalamBirla owned Idea Cellular NSE 3.13 % said its Board has approved of a merger with Vodafone India and its wholly owned subsidiary Vodafone India Mobile Services, which will create India's largest mobile phone company with about 400 million customers, 35% customer market share and 41% revenue market share. • Vodafone will own 45.1% in the combined entity after transferring 4.9% to the promoters of Idea Cellular for Rs 3,874 crore in cash post the merger. Kumar Mangalam Birla and other promoters of Idea Group will hold 26% and the rest will be owned by the public
- 14. • The companiesadded that the implied enterprise value is Rs 828 billion or $12.4 billion for Vodafone India and Rs 722 billion or US$10.8 billion for Idea, excluding its stake in Indus Towers, valuing Vodafone India at 6.4x EV/LTM EBITDA and Idea excluding its stake in Indus Towers at 6.3x EV/LTM EBITDA. • Vodafone will contribute Rs 2,500 crore ($369 million) more net debt than Idea, upon closure of the merger. Based on Idea's net debt of Rs 52,700 crore at December end, Vodafone would contribute Rs 55,200 crore of net debt to the merged entity. • Vodafone India will be deconsolidated, reducing Vodafone Group's net debt by Rs 552 billion or $8.2 billion and lowering Vodafone Group leverage by around 0.3x Net Debt/EBITDA. The transaction is expected to be accretive to Vodafone’s cash flow from the first full year post-completion.
- 15.