Media reports have indicated that Idea and Vodafone are exploring opportunities for a possible merger. The merger could be a significant positive for both the players and the telecom industry, but regulatory hurdles could play the spoil sport. The merger will make the combined entity the number one player with a revenue market share of 42% significantly higher than Bharti Airtel. Apart from the market share gains there could be significant operational synergies which will improve the cash flow profile and capital efficiency of combined entity. The industry will see consolidation benefits of reduced competitive intensity, stable long-term realisations and significant improvement in capital efficiency.
Valuation: Phillip Capital downgraded target price to Rs 130 and maintain BUY recommendation