The telecom industry is undergoing a huge wave of consolidation, as shareholders of Idea Cellular have approved the company’s proposed merger of its mobile business with Vodafone India, according to a regulatory filing. Just yesterday, Bharti Airtel and Tata Group announced that they have entered into an understanding to merge Consumer Mobile Businesses (CMB) of Tata Teleservices Limited (TTSL) and Tata Teleservices Maharashtra Limited (TTML) into Bharti Airtel.
More than 99% of Idea shareholders voted in favour of the merger at the shareholders’ meeting held yesterday, according to Idea’s statement. The merger can conclude only after the National Company Law Tribunal (NCLT) grants approval. Notably, Idea shares surged by close to 6% to close at Rs 78.95 on NSE.
A possible Vodafone-Idea combine will surpass Bharti Airtel as the largest telecommunication company with a total subscriber base of 39 crore. Further, the combined entity would have 43% of the revenue market share and 40% of the active subscriber base, research firm CLSA had said. The report also went on to add that the two operators complement each other, with Vodafone having strong presence in urban areas and Idea being an established player in the hinterland..
However, analysts say that the benefits of the deal may be short lived, as in the long run, there appear to be no visible growth triggers. According to Rajat Sharma of Sana Securities, the view for the sector remains weak, as he believes that the advent of free internet services offered by Jio provides very little opportunity for other players in the industry to add subscribers. Moreover, there are concerns that with the competitors taking active steps to build scale, Reliance Jio may further intensify its offerings, putting even more pressure on the incumbents.
The slew of consolidation in the telecom space may help to reduce the increasing financial stress in the sector. In an interview to ET Now, Gopal Vittal, the chief executive officer of Bharti Airtel said recently, “In the next 12-18 months, we’ll probably be left with only three operators plus BSNL from the current eight players, which is a good thing as this industry needs a lot of investment.”