Vodafone and Idea Merger: A Shareholder’s Dilemma

In the month of May 2019, Ms Priya Vaidehi who works as a chartered accountant in a small firm in the city of Pune was pondering about her personal investment. While surfing on social media on the sunny hot afternoon of 2 May 2019, she came across the news of the biggest merger deal in the Indian telecom sector. The news was about how Britain’s Vodafone Group merged its Indian subsidiary with Idea Cellular, to create the country’s largest telecom firm. They mentioned how the combined entity will accelerate the pan-India expansion of wireless broadband services and also expand financial inclusion through mobile money services. Since the merger, the network has an outreach of 92 per cent of population of India. Ms Vaidehi planning for her future investments narrowed down her investment search to do a deeper analysis of the merger of two telecom giants Vodafone and Idea. The Indian telecommunication market has a subscriber base of 1.20 billion and is rapidly growing. The country’s wireless subscriptions has witnessed compound annual growth rate (CAGR) of 19.62 per cent to reach 1,183.41 million in the year 2018. Over the past few years, from the announcement of merger to the declaration of completion of merger, she has noticed that there has been volatility in the share price of Idea Cellular. Though the subscriber base of Vodafone, Idea’s is around 400 million, and sales had gone up 53.5 per cent in the third quarter of FY 2018–2019, but the share price had been plunging to an average fall of 14 per cent. She was in deep thought whether she should invest in buying the shares of Vodafone Idea? Will her instinct help her or the knowledge of financial markets aid in taking the right decision?