British telecom giant Vodafone Group Plc confirmed today that it was in discussions for a possible merger of its Indian subsidiary with rival telecom company Idea Cellular, whose shares spiked nearly 30 per cent.?
In a statement, Vodafone said it "confirms that it is in discussions with the Aditya Birla Group about an all-share merger of Vodafone India (excluding Vodafone's 42 per cent stake in Indus Towers) and Idea. Any merger would be effected through the issue of new shares in Idea to Vodafone and would result in Vodafone deconsolidating Vodafone India."?
Vodafone Group was responding to the recent media speculation regarding a potential combination of Vodafone India and Idea Cellular. The statement didn¡¯t divulge whether the two companies were in exclusive negotiations or the time period of the negotiations.?
AFP
However, the company added that there was no certainty that any transaction would be agreed upon, ¡°nor as to the terms or timing of any transaction¡±.?
The development comes within months of Reliance Jio Infocomm¡¯s entry into the market which has already led to the consolidation of the telecom industry in the country. ?The merger of the two giants in India could lead to a new number one telecom operator by subscribers and revenue market share, displacing Sunil Mittal-owned Bharti Airtel.?
The combined subscriber count of the merged entity would be nearly 39 crore, substantially higher than Airtel's 27 crore and Jio's present number of 7.2 crore. It would have a revenue market share of nearly 40 per cent compared with Airtel's near-32 per cent. It would have the strongest retail footprint in the industry, as well as robust spectrum holdings.?
Reuters
The merger of British giant Vodafone and the Aditya Birla Group company Idea¡ªNo. 2 and No. 3, respectively¡ªcan change the recent telecom game which began with Reliance Jio's stormy entry into $26 billion Indian telecom market riding on big freebies. Jio has been seen as a challenge to Airtel, the No. 1 company. But the Vodafone-Idea merger can relegate Airtel to No. 3 position. It would be mighty difficult for Reliance Jio to beat the new No. 1 company that would be born after the merger.?
The emergence of as big a player as the merged entity will upset all present calculations. It would be seen how long Reliance Jio can go with its aggression. If Reliance continues its innovation, it will hit Airtel more than the consolidated entity which would have the benefits of market share as well as spectrum holdings.?