Indian telecom Sector:Idea and Vodafone announce merger -key highlights

Idea and Vodafone would have equal rights in the resultant entity

    While Vodafone will have a higher stake (45%) compared to the promoterGroup of Idea (26%), there is an equalization mechanism which would ensurethat both hold equal stakes no later than nine years. In the interim, Vodafone’sexcess stake would be restricted and votes will be governed by a shareholderagreement.

    Our current value of merger synergies is lower than company estimates

    We have estimated the NPV of merger synergies at Rs 170bn ( $2.5bn) for IdeaCellular. For our target price we have take a 50% probability for the realizationof the merger synergies implying Rs 24/share. See our report ‘Retain BUY onIdea..” dated 2/Feb/2017.

    We retain our rating on Idea (BUY, target Price Rs 130)