Why Idea Cellular share price surged a whopping 18% today

Idea Cellular share price had a dream run today. The Idea stock surged a whopping 18 per cent following reports that Idea and Vodafone have inched closer to their merger, creating country's biggest telecom operator. 

The stock gained as much as 17.75 per cent to Rs 62 on the BSE after Idea and Vodafone made joint payment of Rs 7,248.78 crore under protest to the Department of Telecom for merging their mobile business. 

"Idea Cellular and Vodafone have made payment under protest as demanded by the DoT for the merger. Rs 3,926.34 crore have been paid in cash and bank guarantee of Rs 3,322.44 crore have been furnished," an Idea Cellular official confirmed the development. 

The Department of Telecom gave conditional nod for merger of these companies on July 9 and asked companies to meet the demand raised for taking merger on record.

The combined operations of Idea and Vodafone will create the country's largest telecom operator worth over $23 billion (or over Rs 1.5 lakh crore), with a 35 per cent market share and a subscriber base of around 430 million.

The merger is expected to give breather to both debt-ridden firms Idea and Vodafone, from cut-throat competition in the market where margins have hit rock bottom with free voice calls.

It will have the capacity to provide 4G spectrum in all telecom circles of the country. According to a presentation by Idea, the combined 4G spectrum of both the companies are capable of offering up to 450 megabit per second broadband speed on mobile phones in 12 Indian markets.

With the new entity coming in force, Bharti Airtel will lose the tag of India's biggest telecom service provider to the new entity.

WATCH ZEE BUSINESS VIDEO HERE

The combined debt of both the companies is estimated to be around Rs 1.15 lakh crore.

Vodafone will own 45.1 stake in the combined entity, while Kumar Mangalam Birla-led Aditya Birla Group would have 26 per cent and Idea shareholders 28.9 per cent.