Idea-Vodafone Merger

The following article is based on my own interpretation of the said events and/ or publicly available information. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.

  • Srishti Ranjan, MBA 2016-18, Vinod Gupta School of Management, IIT Kharagpur

 

While Reliance Jio’s entry in the Indian telecom sector proved quite a challenge for the big companies in this sector, a possible merger between Vodafone and Idea Cellular may change the telecom scenario altogether. Though the companies did not divulge much details, but both issued statements confirming that their businesses will be merged in a cashless deal. The basic premise of the merger is said to be based on equal rights between Aditya Birla Group and Vodafone in the combined entity.

The merger if materialized will not only knock off Bharti Airtel from its top position in the telecom sector but may also lead to altogether new pricing strategies in the industry. While the merger will mean some relief in financial aspect for Vodafone, Idea will benefit geographically especially in cities where Vodafone already has a good presence. It will enable them to provide a tough competition to Reliance Jio Infocomm and Bharti Airtel. Bharti Airtel currently has 33% market share with around 266 million users, which, if the merger occurs, will be countered by Vodafone-Idea combined user base of 390 million (roughly 43% of the market share). The decision is being taken when already the telecom sector is undergoing a huge price war reinvigorated by the cut throat prices introduced by Reliance Jio. It will be interesting to watch as to how the merger if finalized is practically implemented and what the combined Vodafone-Idea entity is named as.

Reference : http://economictimes.indiatimes.com/markets/stocks/news/vodafone-confirms-merger-talks-with-idea-cellular-5-key-takeaways/articleshow/56870115.cms

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