Idea Cellular shares jump 30% intraday on Vodafone merger talks, biggest single-day jump since listing

Idea Cellular’s share price surged nearly 30% intra-day on Monday after the telecom company said it was contemplating a merger with Vodafone India, the country’s second-largest mobile telephony player. The stock gained 25.9% before closing the session at Rs 97.95. This is the biggest single-day gain for the telecom player’s shares since its listing in 2007. The stock has risen by 44% in the last seven sessions on speculation it might consider a merger with Vodafone India.

A total of 2.6 crore shares changed hands on both BSE and NSE on Monday. In sympathy, share prices of other telecom companies also surged. Idea Cellular confirmed in a filing to the exchanges that it is in preliminary talks with Vodafone for a possible merger. “The company constantly evaluates various opportunities for enhancing the stakeholders’ value. As a part of the exercise, the company has been in preliminary discussions with Vodafone. In view of the fact that the discussion is at the preliminary stage, the Company is not in a position to share any further details,” the company said.

The stock of Idea has risen by 44% in the last seven sessions. A total of 2.6 crore shares changed hands on both BSE and NSE. Last week, Idea postponed its board meeting to consider its financial results for the quarter ended December. As per Bloomberg consensus estimates, the company is expected to post a loss of Rs 403 crore in Q3FY17 as compared to a profit of R642.7 crore in the same quarter last year.

According to market participants, consolidation in the Indian telecom space is a given after the entry of Reliance Jio triggered a price war that some of the smaller players will find hard to manage. “The entry of Jio has created disturbance in this segment and everyone knows that mergers and acquisition are going to be the order of the day. Post Jio’s entry, people are reluctant to pay high prices for high-speed data. The pricing power for telecom companies has been affected,” said AK Prabhakar, head of research, IDBI Capital. “Moreover, Vodafone was anyway looking at getting listed in India and by merging with the idea, the same will be achieved automatically,” he added.

The surge in Idea’s share prices also rubbed onto that of its peers and share price of Reliance Communications jumped 11.49%, Bharti Airtel’s rose 7.48%, and TTML’s rose 5.94%.