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Yaswanth Kumar Parasa, MBA 2016-18, Vinod Gupta School of Management, IIT Kharagpur
UK-based telecom giant Vodafone said on Monday it was in talks for an all-stock merger of its unlisted Indian subsidiary with rival Idea Cellular. This would make the merged entity India’s largest telecom company in terms of revenue, at 43 per cent. It will also become a leading global telecom firm in terms of number of subscribers, at 387 million.
The combined entity will derive significant benefits from network consolidation as the network site requirement will reduce significantly. The combined entity will have concentrated spectrum portfolio with 36.5% of the liberalised spectrum in 1800MHz band, enabling it to deploy higher spectrum per site resulting in higher revenue productivity per site. the Idea-Vodafone merger will help the combined entity to take on RJio more aggressively it will have leaner operations leading to better profitability. This will also boost their ability to invest in the network.
Idea/Vodafone merger could make strategic sense. After merger they can move to No.1 in market share, scale/synergy benefits, and complementary footprint with Vodafone strong in urban areas and Idea strong in rural areas. Also, consolidation is always good, especially for any capital-intensive sector with multiple players
The combined entity will exceed the maximum user base limit of 50% in as many as nine license areas and revenue market share will surpass the 50% threshold in five circles.
Getting proper synergy between two companies and trying to consolidate market share competing with Reliance Jio and Bharti airtel.