Business

Vodafone confirms possibility of merger with Idea

Vodafone confirms possibility of merger with Idea

Global telecom giant Vodafone has confirmed that it is now in talks with national telecom provider Idea, which is owned by the Aditya Birla Group, to merge the two companies.

Vodafone Idea merger has been confirmed officially and right after the news spread, Idea Cellular shares hiked by nearly 29 percent on Friday. Ultimately, this "would result in Vodafone deconsolidating Vodafone India", the firm said in a short statement.

Idea shares spiked as much as 29.17 percent to touch an intraday high of Rs 100.5 as the news filtered through.

A combination may trigger competition concerns as the merged entity may be dominant in some circles, said Prashant Singhal, global telecom leader at audit and consulting firm EY.

Vodafone clarified that the proposed merger would not include its 42 per cent stake in Indus Towers, a three-party venture with Bharti Airtel and Idea Cellular. This would mean the Vodafone-Idea merged entity would have share of almost 49 percent.

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Vodafone holds the No. 2 position in India but is under pressure from lower-cost rivals, prompting it to write down the value of the business by EUR5 billion ($5.35 billion) late a year ago.

Any merger, if it happens, would drastically change the pecking order in the Indian telecom industry. The unification with Idea Cellular in India makes Vodafone more powerful to compete against the Bharti Airtel and Reliance Jio.

Morningstar goes on to state that the merger is another sign of how Jio has created hurdles in the Indian telecom sector with its free services.

That would be equivalent to a 36 per cent market share, placing it ahead of Bharti Airtel, the current number one, which has about 260 million subscribers in India. This merged entity will become the largest Indian telecom company with a market share of roughly 43%, reported Mint. The move comes amid intense competition in India's mobile market.

Since Jio's arrival in September 2016, its free data and calling offer has led to existing players dropping their guards to new lows and have been luring subscribers with free additional data and calling offers on existing plans. It would also trump the mergerof the wireless operations of Reliance Communications Ltd, controlled by Mukesh Ambani's brother Anil, and Aircel Ltd that created India's fourth-largest telecom operator.