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Jio effect: Vodafone-Idea merger could mean long term strategy, not just gaining market share

  • Vodafone has said it is considering a merger of its Indian subsidiary with Idea Cellular Ltd.
  • If both companies agree, the merger would create a market share of 43 percent.
Vodafone Idea merger

The Indian telecom industry has been hitting headlines as companies are trying to combat the free Reliance Jio offer. We’ve seen some lucrative offers from BSNL, Airtel, and others. Now, Vodafone has confirmed that its Indian subsidiary and Idea cellular are in talks for a merger. 

 

The merger is believed to be a cashless deal, and the outcome would be an overall market share of 43 percent. This way, it could surpass the 33 percent share enjoyed by Bharti Airtel to become the biggest Indian telco. 

 

In a nutshell, the second and third largest telcos in India could come together to form the biggest telco in the country.  Apart from turning into the biggest telco, it would also mean Vodafone could finally realise its IPO dream. 

 

Analysts expect it to be a long term strategy rather than just a way to gain market share. Amresh Nandan, Research Director, Gartner added, “If they decide to do so, one can hope for a long term strategy behind it and not just gaining market share and subscriber share. It would be very important for the merging entities to realise the transformation required in their operations. At this point in time in communication industry, transforming themselves while they consolidate will be a necessary step, even though not an easy one,” 

 

However, the premise of the discussion is both Vodafone and Aditya Birla Group should have equal rights in the entity. If you consider subscribers and revenue, Vodafone India is bigger than idea Cellular. May be that’s why both companies, according to Economic Times, have confirmed that these are just preliminary talks and may not necessarily materialise. 

 

Considering the ongoing price war, Idea has been quite vocal about how the 'pain is inevitable'. On the other side, Vodafone's financial woes are also quite clear, as everyone impacts from the free data and voice services offered by Jio.

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