Shares of the telecom service operators were on a roll on Monday amid news reports of major consolidation moves gaining momentum, involving the biggies Tata Teleservices, Reliance Communications, Idea Cellular and Vodafone India, as the incumbents look for scale and operational efficiency to take on the onslaught of competition from the giant new entrant Reliance Jio.
Reliance Communications and Tata Teleservices (Maharashtra) shares spiked on news of Tata Teleservices mulling joining the planned R-Comm-Aircel-MTS combine, while Idea Cellular surged after reports that its proposed merger with Vodafone India may be concluded in a month.
Bharti Airtel rose 2.6%, Idea Cellular rose 5.5%, Reliance Communications rose 6.9% and Tata Teleservices (Maharashtra) Ltd rose 10.4% at the day’s highs.
Earlier today, news reports suggested that Tata Teleservices is in talks with Reliance Communications to merge its operations with the Anil Ambani group-controlled entity. Tata Teleservices, unlisted, is a group company of Tata Sons – India’s largest business group. Tata Teleservices (Maharashtra), its unit operating in the state of Maharashtra is listed on stock exchanges.
Reliance Communications is already all set to finalise deals to merge Aircel Ltd into its own wireless telephony business. It is also in the process of finalising a merger of Systema Shyam Teleservices, the owner of MTS services, with itself.
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The proposed merger, if it sails through, would make it the third largest operator in the rejigged order, far behind Idea-Vodafone combine, and very close to Bharti Airtel, in terms of the number of subscribers. Vodafone India has 205 million users, Idea Cellular has 190 million and Bharti Airtel has 266 million, while Tata-Tele-R-Comm-Aircel-MTS would have about 260 million put together.
Meanwhile, other news reports suggested that Idea Cellular and Vodafone India are looking to seal their proposed merger within a month. Earlier last month, Idea and Vodafone confirmed talks to merge the two companies business operations in an effort to gain the required scale to take on the heightened competition from Reliance Jio. the combined entity would have 43% of the revenue market share and 40% of the active subscriber base, research firm CLSA said.
Reliance Jio’s entry into the telecom space has forced the incumbent players to drastically cut tariffs – as much as by 66% – in order to retain their customer base, and has put the entire sector under tremendous pressure of choosing between protecting margins and user base. Reliance Jio recently extended its inaugural free voice and data plan till March 31 drawing complaints and criticisms from its biggest rivals Airtel, Vodafone and Idea, who assert that its anti-competitive practices and freebies are hurting the industry. Vodafone earlier went as far as to write down the value of its India business on hyper competition from the new entrant.
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Reliance Industries, India’s largest business conglomerate, launched its much awaited telecommunication venture Reliance Jio Infocomm last year with a whopping Rs 1.5 trillion investments to start with, mainly in building high-speed internet infrastructure over the new 4G/LTE network across the entire country. It topped it up with an announcement of a further investment of Rs 30,000 crore in December.
Reliance Jio has said it has been adding 600,000 new users per day had already added 72.4 million customers as on December 31 on its network since launch in a hyper competitive market.