Vodafone India, following the telecom market redesign triggered by Reliance Jio, has now confirmed that it is in talks for an all-share merger with Idea Celluar. The discussion with the Aditya Birla group’s company was confirmed by UK-based Vodafone Group Plc. Vodafone is India’s second biggest telecom services provider, while Idea is the third largest network operator in the country. If there is a merger, it will be the first consolidation in Indian telecom industry and the reason behind it is Reliance Jio’s offering of free 4G services. Meanwhile, Idea has also clarified on the news saying, “merger may be the best idea for Vodafone, sir Ji!”
The entry of Rjio into the telecom sector in 2016 has been forcing other rival companies to cut tariffs, so that they do not lose out of its own consumer base apart from protecting its margins as well. Reliance Jio had recently extended to its new offer, Happy New Year, even after the completion of its ‘Welcome Offer’. This resulted in a lot of backlashes, including criticism from other incumbents, like Vodafone and Idea who accused Jio of disrupting the telecom space. Here are 10 things you should know about the deal:
1. Vodafone is the second largest telecom service provider in India, with 202.79 million users and Idea Cellular is placed at third, with 187.68 million users. Meanwhile, Bharti Airtel is the largest telecom operator with 263.35 million mobile subscribers.
2. According to CLSA, Vodafone-Idea combined entity would have 43 per cent revenue market share as against the 32.84 per cent of Bharti Airtel currently and 13 per cent for Reliance Jio by 2018-19.
3. Vodafone, a unit of the UK-based Vodafone Group Plc, will subscribe to new shares issued in the Birla Group company Idea Cellular to effect the merger, the UK company said. Further, any merger would result in Vodafone Plc ‘deconsolidating’ Vodafone India.
4. In the case of a merger, there will be an issuance of new shares in Idea to Vodafone. It would result in de-consolidation of Vodafone.
5. According to CLSA analysis, a potential merger of Vodafone India with Idea Cellular reveals that such a mega deal would change the industry order.
6. Meanwhile, Vodafone India has moved the Delhi High Court alleging that telecom regulator TRAI had failed to prohibit ‘blatant violation’ of its tariff orders, directions and regulations by RJio by permitting it to continue with its free offers.
7. Vodafone has further claimed that due to TRAI’s ‘arbitrary, irregular action/inaction’, RJIO, ‘in the garb’ of ‘test service’ or preview offer, amassed millions of subscribers by offering them free services during the so- called test period.
8. Vodafone’s stock jumped 3 percent after it said a deal would enable it to deconsolidate the asset, or take it off its books, and receive a dividend from the combined group.
9. Idea shares soared more than 27 percent in India on heavy volumes and were poised for their best day on record.
10. In 2016, Vodafone took a $5 billion charge on the value of its India business after the domestic telecom market was thrown into turmoil by the arrival of Jio.
(With Agency inputs)