Vodafone- Idea Merger News: Officially Confirmed

Vodafone has officially confirmed that it is in discussions for a possible merger with the India’s 3rd largest operator Idea Cellular under the pressure of intense competition from Reliance Jio’s free service offers.

The deal would exclude Vodafone’s 42% stake in Indus Towers, as stated by the London Stock Exchange (LSE). Indus Towers, a telecom infrastructure provider, is a joint venture between Vodafone India, Idea Cellular and Bharti Airtel Ltd.

The Vodafone Group Plc’s Exchange Filing has stated that any merger would be effected through the issue of new shares in Idea Cellular to Vodafone and would result in Vodafone deconsolidating Vodafone India. Though, there is no certainty that any transaction would be agreed to, nor as to the terms or timing of any transaction.

According to BloombergQuint‘s calculation, the merged entity would become the India’s largest telecom operator, holding around 1,120 megahertz of spectrum across five bands.

As per the global brokerage house CLSA recent report, the potential merger between Vodafone India with Idea Cellular would change the industry order. The combined entity would have 43% revenue share in the market by FY19CL against 33% of Bharti Airtel and 13% for Reliance Jio.

Though, the possible merger will need to be approved by the Department of Telecommunication (DoT) and Telecom Regulatory Authority of India (TRAI).

Rajan S Mathews, Director General of industry body Cellular Operators’ Association of India (COAI), said

Vodafone-Idea merger would be good news for customers. The merger would help both the companies to attract investments that will be key for future

Although, both Idea and Vodafone will have to consider the combined spectrum they hold in order to avoid breaching the regulatory limit.

In a bid to spur Mergers and Acquisitions (M&A) in the crowded telecom sector, the telecom firms are allowed to merge if their combined market share in terms of subscriber base does not exceed 50% in a particular circle. As per M& A policy, the merged entity will not be allowed to hold more than 25% spectrum allocated in a service area and not more than 50% in a particular band for telecom services under the rule.

Megha Jain

Engg & Freelance Author

Straight forward