On January 30th, 2017 (Monday), Britan’s Vodafone Group confirmed their wish to merge with an Indian-rival Idea cellular, in what seems to be an all-share deal to combat Reliance Jio’s advance in the telecommunication department.
Vodafone is the world’s 2nd largest cellular network operator and they entered the market in the year 2007 amidst immense competition from Bharti Airtel and other various cellular operators who have come up in the country over the past decade.
Last year, Reliance Jio Infocomm led by Mukesh Ambani launched an unbelievable offer of free calls and subsidised data packs which gave Vodafone & Airtel – the two toughest competitors in the market, a run for their money.
Along with Vodafone and Airtel, Idea also slashed their call prices and introduced better priced data services to combat the effect of Jio.
Although financial analysts have predicted the move to face several regulatory hurdles especially in case of customer base (when combined ) and revenue market shares, such a merger could mean better data connectivity as 4G Data spectrum is gaining quick recognition within the country.
So, what does such a merger mean?
In totality, when combined, the firm would have 43% of the market share along with over 380 subscribers.
Bharti Airtel would then have only 33% of the market share.
Though it is currently in the initial stages of discussion, such a merger would mean better data services for customers.
This merger would also mean Vodafone de-consolidating Vodafone India.
This merger would also mean less competition for Bharti Airtel in the market.
With Vodafone and Idea joining forces, Airtel, which is already India’s largest operator, has one less competitor to tackle.
The news of such a hope helped the price of Airtel stock to increase by 7.50% to Rs. 347.65 on the Bombay Stock Exchange this Monday.
Apart from this, Idea share prices jumped by 56% by Tuesday, 31st of January 2017.
Reliance Jio has made a gigantic investment in the telecomm sector with around $30 billion for an industry which offers revenues of $27 billion.
Having said this, if the merger is to take place, Jio is going to match up by introducing more lucrative methods to gain what they could lose by the merger.
While the share prices of Vodafone, Idea and Airtel continue to rise, this is completely a waiting game as the tables could turn in anyone’s favour given the immense competition in the Indian telecomm sector in 2017.