Telecom index surges nearly 6% after Vodafone confirms merger talks with Idea
The merger will create an entity with a subscriber base of more than 400 million to emerge as the largest player in India, replacing the current dominant player Bharti Airtel.
By ETMarkets.com | Updated:
NEW DELHI: Telecom stocks surged on Monday after Vodafone confirmed it was in talks with the Aditya Vikram Birla group for the merger of its Indian entity and Idea Cellular in what will be the largest such deal in the country's telecom space once it materialises. The BSE Telecom index closed nearly 6 per cent up at 1,250.57 on Monday.
The merger will create an entity with a subscriber base of more than 400 million to emerge as the largest player in India, replacing the current dominant player Bharti Airtel, which currently has over 260 million users on its network.
Reacting to the news, share price of Idea Cellular surged nearly 30 per cent intraday on Monday. "Vodafone-Idea Cellular merger will create huge synergy. It will result in huge Capital expenditure as well as low margin. If you remember all the telecom companies were supposed to get listed but Vodafone didn’t get the appropriate time. Now, by taking over Idea Cellular they will get listed by way of a reverse merger,” AK Prabhakar, Head of Research at IDBI Capital told ETMarkets.com.
Other telecom majors such as Reliance Communications and Bharti Airtel surged as much as 12.46 per cent and 14.39 per cent, respectively.
On the robust movement of Bharti Airtel, Dharmesh Kant of Motilal Oswal Securities said that the surge in Bharti Airtel shares can be attributed to a number of reasons.
“The deal, if materilises, would lead to further consolidation in the telecom industry. Besides, the valuations at which the Idea-Vodafone deal will be valued, would take care of the industry valuations. It would be taken as the benchmark,” Kant said.
Other telecom majors Tata Communication and MTNL closed higher by 0.93 per cent and 1.90 per cent, respectively.
However, share price of Bharti Infratel closed 7.07 per cent down at Rs 328.75.
The merger will create an entity with a subscriber base of more than 400 million to emerge as the largest player in India, replacing the current dominant player Bharti Airtel, which currently has over 260 million users on its network.
Reacting to the news, share price of Idea Cellular surged nearly 30 per cent intraday on Monday. "Vodafone-Idea Cellular merger will create huge synergy. It will result in huge Capital expenditure as well as low margin. If you remember all the telecom companies were supposed to get listed but Vodafone didn’t get the appropriate time. Now, by taking over Idea Cellular they will get listed by way of a reverse merger,” AK Prabhakar, Head of Research at IDBI Capital told ETMarkets.com.
Other telecom majors such as Reliance Communications and Bharti Airtel surged as much as 12.46 per cent and 14.39 per cent, respectively.
On the robust movement of Bharti Airtel, Dharmesh Kant of Motilal Oswal Securities said that the surge in Bharti Airtel shares can be attributed to a number of reasons.
“The deal, if materilises, would lead to further consolidation in the telecom industry. Besides, the valuations at which the Idea-Vodafone deal will be valued, would take care of the industry valuations. It would be taken as the benchmark,” Kant said.
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Other telecom majors Tata Communication and MTNL closed higher by 0.93 per cent and 1.90 per cent, respectively.
However, share price of Bharti Infratel closed 7.07 per cent down at Rs 328.75.
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