A major consolidation in the Indian telecom industry is likely in the coming months.
With rumours swirling for a while now, Vodafone on Monday finally confirmed that it is in talks with Idea Cellular to merge its Indian operations.
If the planned merger goes ahead, Vodafone will add Idea’s existing customers to its network and cross the 300 million mark. By teaming up, both can strengthen their rural and urban position.
The merger could be “an all-share deal that could help the groups counter the fierce competition in the market”, Vodaofone said.
But the merger and acquisition guidelines in telecom state that a merger is allowed only if the percentage of adjusted gross revenue and subscriber base of the merged entity does not command more than 50 percent of the market share in a particular circle.
It also specifies that the combined entity should hold not more than 50 percent of spectrum in each circle, and not more than 25 percent of the entire spectrum available to telecom operators in the country.
The merged entity will have excessive spectrum in five circles – Maharashtra, Gujarat, Kerala, Haryana, and Uttar Pradesh (West). 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).
The merged entity will be the market leader in 12 out of the present 22 circles. The subscriber data base as of October 2016 suggests that the subscriber cap would be breached in five circles – Maharashtra, Gujarat, Kerala, Haryana and West Bengal.
Vodafone and Idea, along with Airtel, have faced the brunt of Reliance Jio’s entry in 2016 with its slew of free internet and voice calling offers.
This reality has already sunk in with Airtel reporting a plunge in the profits by up to 55%, with others expected to record similar figures as well. Airtel is currently the largest telecom operator in the country, followed by Vodafone.
Reliance Jio, as of 31 December 2016 had over 82 million users on its 4G-only network.
(With inputs from BloombergQuint and Reuters)
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