Voda, Idea in merger talks; experts cite regulatory challenges

The entry of Reliance Jio Infocomm, with its pan-India 4G network, late past year, has accelerated the long-anticipated consolidation in the Indian telecom sector.

Kapoor said Airtel and Jio are ideally placed to “aggressively focus on customer acquisitions and market expansion at a time when Vodafone and Idea’s senior management bandwidth is likely to be engaged in consummating an extremely complex merger process that could take anything from 12 to 18 months”. Idea said in a statement that the early talks between the two sides were based on equal rights between its owner, Aditya Birla group, and Vodafone, which would get shares in Idea.

The deal would not include Indus Towers, the infrastructure firm that Vodafone has a 42% stake in.

Vodafone’s chief financial officer, Nick Read, said at the time of the write-down in November that the company was still prepared for an initial public offering of its Indian unit but was waiting for market conditions to improve.

Sanjesh Jain, Analyst at ICICI Securities, in a report released on January 23, had said, “We strongly believe Vodafone and Idea can potentially enter into spectrum sharing (for 2100MHz/1800MHz spectrum bands) and active infrastructure sharing agreements, which imply virtual consolidation among the top-3 operators.”

Idea shares closed 25 percent higher.

Vodafone India has over 200 million customers, while India Cellular’s subscriber base stands at 186.4 million.

Following media speculation about possible merger of Idea Cellular with Vodafone Plc amid growing competition from Reliance Jio, Vodafone has confirmed the merger deal talks are on.

Bharti Airtel is presently the number one telecom industry in the country. The aggregate revenue market share of the entity will also breach the 50 percent cap in seven circles – Mumbai, Maharashtra, Gujarat, Kerala, Haryana, Uttar Pradesh (West). It launched its 4G network in October and provided free services till 31 December 2016 (this was later extended to 31 March 2016).

Vodafone slashed its prices in response, even asit wrote down the value of its Indian business by $5 billion Other big players including Idea and market leader Airtel have also been forced to cut their prices.

It had written down value of business by 5 billion euro, late previous year.