Vodafone and Idea Cellular Make a Wireless Giant

Vodafone will initially own 45.2% of Vodafone Idea with the Aditya Birla Group owning 26%, but with the expectation to buy additional shares from Vodafone over time until the two’s shareholdings are equal. While the current stock price values Vodafone’s shares at EUR 5.3 billion we are concerned the shares will continue to decline until RJio shows more rationality in the market. The stock has dropped 57% from its recent high at the beginning of January. Hence, we are not crediting Vodafone for the full current value of its stake. One important item is the merger provides a listing for Vodafone’s Indian operation, which has been a goal for several years. It also provides an exit strategy if Vodafone decides to leave the country at some point.

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.