Vodafone and Idea Merger – The Road Ahead

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 Any material borrowed from published and unpublished sources has been appropriately referenced.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.

Nikunj Agarwal, MBA 2016-18, Vinod Gupta School of Management, IIT Kharagpur

Vodafone & Idea have finally confirmed about the ongoing talks for a possible merger of their operations in India. The Vodafone-Idea merger, if a deal indeed goes through, would be the biggest such consolidation in the sector, and create the largest telecom operator of India. The discussion is still in preliminary stage as both companies need to agree upon certain terms and conditions. The deal is based on the premise that both companies would hold equal rights in the Vodafone-Idea merged entity.

The merged Vodafone-Idea entity will become the biggest telecom operator in India, both by subscribers and revenue. At present, Airtel leads the market with 265.85 million mobile subscribers, as per COAI data, while Vodafone and Idea have 204.69 million and 190.52 million mobile users respectively. The merged Vodafone-Idea unit will have a combined user base of 395.21 million, putting it far ahead of Airtel. It will also be at a safer distance from Reliance Jio which is a recent disruptor in the industry.

But, this merger will face some issues. As per government regulations, the merged entity can’t have more than 50% market share in Telecom industry in terms of subscriber base. If the merger takes place, the merged entity will have over 50 percent subscriber market share in five circles – Maharashtra, Gujarat, Kerala, Haryana and Uttar Pradesh (West). Similarly, it will cross the 50 percent limit in RMS in seven circles – Mumbai, Maharashtra, Gujarat, Kerala, Haryana, and Uttar Pradesh (West). This will face regulatory hurdles. TRAI would have to step in to ensure that none of the practices of the Vodafone-Idea joint entity are anti-competitive, considering the large market share.

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