comscore Vodafone-Idea merger deal to be officially announced this week: Report
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Vodafone-Idea merger deal to be officially announced this week: Report

The 21 billion euro deal is expected to create India’s biggest telecom firm.

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The mega-merger of Vodafone India and Idea Cellular is reportedly set to be officially announced this week. According to reports, the 21 billion euro deal will see the two companies holding an equal stake and result in Vodafone de-consolidating its India arm. The merger is seen as the first casualty resulting out of Reliance Jio s commercial rollout in late last year that has put incumbent players under immense pressure to offer more affordable plans to consumers. Also Read - Jio Freedom Plans 2021: Jio launches 5 new prepaid plans with no daily data limit - check details

Also Read - How to recharge your Jio number via WhatsApp

Following the merger, Vodafone India and Idea Cellular would together create a new entity that will be able to compete better in the price war triggered by the entry of Reliance Jio. It is expected that the resulting merged entity will be headed by Kumar Mangalam Birla as the chairman and hold about 42 percent market share. The equity value of both the companies has been estimated at Rs 40,000 crore each while the combined entity would have debt of approximately Rs 89,000 crore, ET Telcom reports. Also Read - 5G JioPhone launch could be around Diwali this year, price to be around Rs 3,500

According to The Telegraph, the deal is believed to be a face-saving move to preserve Birla family pride, while for Vodafone, it would mean taking the debts off the main company balance sheets.

It is worth mentioning that currently, Vodafone India has over 200 million subscribers with presence in all 22 circles. The company plans to have 4G services in 17 circles by the end of this fiscal. Meanwhile, Idea Cellular also has presence in all 22 circles with a similar subscriber base. Together, the new entity is expected to be India s biggest telecom firm.

In contrast, Reliance Jio, which made its debut in September, recorded over 70 million in just four months of launch. By offering three months of free data and voice calls under its promotional offers, Jio was able to garner the huge user base in a short span of time. Reliance Jio last month reported surpassing the 100 million subscribers milestone.

Reliance Jio s meteoric rise is attributed to the slew of free schemes, the company, however, has now started offering monthly paid plans. The company also introduced a Jio Prime Membership plan under which users could avail Happy New Year s offers and other benefits for more time. Now, the impact of consumers transitioning from free schemes to paid plans on Jio s speedy growth.

That said, Jio s aggressive strategy for expansion in India hasn t gone unchallenged. While incumbent players are already offering much more lucrative and affordable data plans, a combined Vodafone-Idea entity is likely to be a stronger competition where the two operators combine their subscriber bases and network capabilities.

Vodafone-Idea merger has also kicked off the long-predicted trend of consolidation in the Indian telecom space. When reports about Vodafone-Idea merger started flowing in, Airtel and Telenor reached a definitive agreement for an acquisition. ALSO READ: Bharti Airtel to acquire Telenor s India operations

Finding a long term solution to our India business has been a priority for us, and we are pleased with our agreement with Airtel, Sigve Brekke, Chief Executive Officer of Telenor Group said. The decision to exit India has not been taken lightly. After thorough consideration, it is our view that the significant investments needed to secure Telenor India s future business on a standalone basis would not have given an acceptable level of return.

Once the acquisition is completed, Airtel is expected to take over Telenor India s assets including employees, operations, licenses, spectrum and customer base of around 44 million. Besides gaining additional subscribers, the acquisition is expected to help the company expand its spectrum volume with the inclusion of 43.4MHz spectrum in the 1800MHz band. ALSO READ: Reliance Jio Prime: The Rs 303 and Rs 499 plans are great, but with a catch

On completion, the proposed acquisition will undergo seamless integration, both on the customer as well as the network side, and further strengthen our market position considerably in several key circles. The customers of Telenor India will be able to enjoy India s widest and fastest voice and data network, and a range of Airtel s world-class products and services, Gopal Vittal, Managing Director and CEO (India and South Asia), Bharti Airtel, said.

Meanwhile, a possible merger between BSNL and MTNL has again garnered attention from the government officials in light of debts and the ever-stiffening competition from the newer players. If the trend is to continue, there will be a lesser number of network operators in the country, which will help eliminate duplicate network investments and avoiding future spectrum auctions, other than intensifying the price war. With a few players, one could expect a more quality network service in the country where the demand for 4G is on the rise.

BONUS VIDEO: Reliance Jio VoLTE for LYF

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  • Published Date: March 14, 2017 11:46 AM IST



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