Idea Cellular-Vodafone confirm merger talks to create country’s biggest telco

NEW DELHI: Idea Cellular and Vodafone confirmed on Monday that the two companies are exploring a merger of business operations which would create the country’s biggest telecom company, ahead of Bharti Airtel.

The news, which was first reported by TOI on January 28, sent the shares of the

Aditya Birla-group

company through the roof and it closed the day up 26% at Rs 97.95.

“Vodafone confirms that it is in discussions with the Aditya Birla group about an all-share merger of Vodafone India (excluding the 42% stake in Indus Towers) and Idea,” the British telecom major said in a statement during the day.

“Any merger would be effected through the issue of new shares in Idea to Vodafone and would result in Vodafone deconsolidating Vodafone India,” the company further said, adding that “there is no certainty than any transaction will be agreed, nor as to the terms and timing of any transaction.”

In a separate statement, Idea Cellular said, “The company constantly evaluates various opportunities for enhancing the stakeholders value. As a part of the exercise, the company has been in preliminary discussions with Vodafone.”

The company said since the discussions are at an early stage, it is not in a position to share any further details. “However, it is important to mention that the fundamental premise of preliminary discussion is based on equal rights between Aditya Birla Group and Vodafone in the combined entity,” Idea Cellular said.

The news, however, has created a buzz and excitement within the telecom industry with analysts saying that it will help players counter the back-breaking competition unleashed by Mukesh Ambani’s Reliance Jio through its life-time free calling and limited-period complementary data downloads.

“It will lead to further consolidation in the industry, and smaller players will need to fold up,” said Prashant Singhal, the global telecommunications leader at Ernst & Young. “A

Vodafone-Idea

merger may actually be good for the Indian telecom industry as stronger, but fewer, players will mean that they can have better returns on their huge investments while also having space for innovation.”

Mansoor Ali Shoket, who heads the communications vertical at law firm J Sagar Associates, said that Jio’s aggressive stance will prompt more and more companies to consolidate. “It makes sense, as everybody wants to protect their turf.”

If a deal is reached, a combined Vodafone-Idea entity will have nearly 39 crore subscribers (Airtel has 27 crore and Jio 7.2 crore) while also having a near-40% hold of the revenue market share.