On Monday, the London-based Vodafone has confirmed that it is in talks to merge their Indian subsidiary with Aditya Birla Group’s Idea Cellular in an all-share deal.
The news comes in after Vodafone Group Plc had intimated the London Stock Exchange (the stock exchange where the company is listed) regarding the same.
The Vodafone’s statement to LSE:
Vodafone confirms that it is in discussions with the Aditya Birla Group about an all share merger of Vodafone India (excluding Vodafone’s 42% 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. There is no certainty that any transaction will be agreed, nor as to the terms or timing of any transaction.”
The news led to a 29% surge in shares of Idea Cellular.
The rumours about the merger were rife for the past few weeks, with media reports claiming that Vodafone is looking for a consolidation, with either Reliance Jio or Idea Celluar.
However, CLSA, a brokerage and investment banking company, had published a report on 17th Jan, claiming that merger with Idea would be a better bet for the London-based company.
The report stated:
Such a merger will help Vodafone India improve its position in the mass market, while Idea Cellular would gain from Vodafone’s strength in the metro circles. Finally, the merger would create a new leader in the mobile/data industry, challenging both Bharti Airtel and Reliance Jio and further intensify the competition.”
As of October 31, Vodafone has 20.19 crore subscribers, with 18.7 percent market share. It covers all 22 circles in the country. It plans to implement 4G services in 17 circles, covering 2,400 towns, by March 2017.
Idea Cellular has 18.52 crore subscribers and 17.17 percent share. It intends to have 4G services in 20 circles by March 2017.
The merger between the two companies would lead to a customer base of over 38 crores, hence becoming India’s biggest telecom operator.
Their consolidation would surpass Bharti Airtel, which has 26.23 crore subscribers and 24.32 percent of the telecom customer base.
The Indian Telecom War:
The merger seems to be in response to the launch of Reliance Jio, the telecom company owned by Reliance chairman Mukesh Ambani.
Ambani has invested about $25 billion in the new enterprise, which has offered free 4G services to customers since its public launch in the month of September.
Since then, Jio has attracted over 70 million customers and forced the existing telecom operators to reevaluate their strategies.
Therefore, Vodafone was forced to take $5 billion writedowns of its India business, reportedly because of the telecom competition in the country.
Furthermore, Bharti Airtel reported a 54 percent dip in its December quarter profits, its lowest profit in four years. It was clearly due to the fierce competition with Reliance Jio.
Airtel has also filed a case against Reliance Jio for allowing the latter to allow free services even after completion of the three-month trial period. Telecom Disputes Settlement and Appellate Tribunal will hear the case on 1st February.
Cover Image: Source
Kshitij runs The Patil Post and Zetabyte Solutions Pvt. Ltd. - a web development company focussed on E-Commerce implementations. Loves to eat, sell, write and talk. He is an avid reader, an enthusiastic traveller and trekker at heart.
Pingback: Another Jio Effect: Bharti Airtel To Acquire Telenor's India Operations | The Patil Post
Your email address will not be published. Required fields are marked *
© 2015 - 2017 The Patil Post. All Rights Reserved. | Powered by Zetabyte Solutions Pvt. Ltd.