Hold Idea Cellular; target of Rs 100: ICICI Direct

ICICI Direct's research report on Idea Cellular

Idea has announced merger of Vodafone India (excluding 42% stake in Indus) with itself, resulting in a combined entity with equal rights. The combined entity will be the largest Indian telecom operator with a subscriber base of 400 million and subscriber, revenue market share of 35.1%, 40.7%, respectively (as on December, 2016). The deal is expected to be completed by CY18 subject to certain regulatory approvals.

Outlook

The cost synergies, brand synergies and extensive spectrum base would benefit the combined entity as a whole, albeit over a longer term horizon. With the deal completion expected only over the next 18-24 months, full benefits set to accrue after three years and near time pricing pressures due to Jio’s attempts to capture market share, we maintain our HOLD recommendation on the stock with a target price of Rs 100.