Telecom slips on merger announcements, Idea sheds 10%

Telecom sector slipped, with Idea Cellular's stocks plunging by almost ten per cent on Monday -- a day of major merger announcements in the telecom space.

At closing, the scrip of the telecom major was down by 9.55 per cent to Rs 97.60 per share at the BSE, emerging as the worst loser of the day.

Overall, the S&P BSE telecom index, which opened at 1,268.30 points, closed at 1,251.19 -- down 13.99 points or 1.11 per cent.

Telecom giant Bharti Airtel remained a gainer, with its shares up 0.79 per cent to Rs 349.45 per scrip at the BSE. On the other hand, Reliance Communications was down by 0.26 per cent to Rs 38.15 per share.

In one of the biggest mergers in the telecom space, Vodafone India and Aditya Birla Group-promoted Idea Cellular announced the much-awaited amalgamation, following which Vodafone will hold 45.1 per cent in the combined company.

"The market did not take the news (of Idea Cellular merger with Vodafone India) well with Idea shares losing 10 per cent in value and closing the day at Rs 97.60. Analysts were unhappy with the structure of the deal as the joint entity will continue to have high debt levels," Vijay Singhania, Founder and Director of brokerage firm Trade Smart Online, told IANS.

"The merger is not witnessing any cash inflows from either companies. Besides, the deal price is around the current price of joint entity as reported in the exchange disclosure. This leaves little room for appreciation," Singhania noted.

In another announcement, Reliance Communications has received approval of the Competition Commission of India (CCI) for the proposed merger with Aircel.

--IANS

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