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Vodafone Confirms Merger Talks with India's Idea Cellular

Vodafone Confirms Merger Talks with India's Idea Cellular

U.K.’s Vodafone confirmed it was in talks to merge its Indian subsidiary with its local rival in an all-share deal. A possible merger between the country’s No. 2 provider Vodafone India and its third largest, Idea Cellular Ltd., will create a subscriber base of 395 million subscribers propelling Vodafone to first place (by number of subscribers), a slot that Bharti Airtel currently occupies, and give it a revenue market share of around 40 percent in the country’s telecom sector.

Vodafone India

Reuters reports that Idea and Vodafone complement each other: Idea is stronger in rural areas while Vodafone’s Indian unit is more competitive in cities. The new entity will be able to cut costs mainly through reduced capital spending and network operating costs, and pose a direct threat to Bharti Airtel and Reliance Jio say analysts.

 “With each generation of mobile evolution, such as 3G, 4G and now 5G, the cost of upgrading goes up. In telecommunication, returns are all about scale – as the fixed costs of the network are about the same for everyone,” Chris Lane, analyst at Sanford C. Bernstein, said in a telephone interview, to Economic Times. “As you slip down the ranks, you become more and more sub-scale and profitability keeps diminishing,” he added. Competition will raise the stakes for India’s wireless providers, with analysts predicting a period of consolidation where smaller providers will be acquired or will exit the market.

 

 

 

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