Reuters reports British Vodafone Group has confirmed it was in talks to merge its Indian subsidiary, Vodafone India with local rival Idea Cellular in an all-share deal that would create a new market leader better able to contest a brutal new price war.
Amresh Nandan, research director at Gartner said about the possible Vodafone-Idea merger, “Consolidation seen during 2015-2016 was expected to continue in 2017, so if this happens it would not be surprising. Both Vodafone India and Idea have to figure out their long term business strategy and merger could well be the path, given current industry competitiveness and dynamics.
If they decide to do so, one can hope for a long term strategy behind it and not just gaining market share and subscriber share. It would be very important for the merging entities to realize the transformation required in their operations. At this point in time in communication industry, transforming themselves while they consolidate will be a necessary step, even though not an easy one.”
It hasn’t been an easy ride in the subcontinent for Vodafone, the world's second-largest cellphone networks operator. Ever since it entered the Indian market it has gone through a barrage of price wars, a notorious tax battle and an overall torrid time winning share in one of the fastest growing telecom markets in the world.
Reliance Jio’s storming into the market with a bang could not have helped matters either.
Jio’s free plans also forced Vodafone and Idea to slash their prices as well.
Vodafone India was marked down by 5 billion dollars as it flailed in the face of intense competition. Plans were halted for a market flotation due to the likely reason of Jio-triggered price wars.
Vodafone group is locked in battle over tax claims valued at over 2 billion dollars following the purchase of Vodafone India from Hutchison in 2007.
However read a Vodafone statement issued earlier in the day, "There is no certainty that any transaction will be agreed, nor as to the terms or timing of any transaction."
Reuters report that analysts predict a combined Vodafone-Idea business will result in an Indian user base of about 375 million subscribers. That’s 36 percent of the market share. Bharti Airtel has around 260 million subscribers.
The news raised Idea share prices by 25 percent; Vodafone’s by 3 percent. Airtel shares were up a reported 6.7 percent.
