Vodafone in talks to merge its Indian business with rival Idea Cellular

Company - Himanshu Gill - Jan 30,2017

Rating -

stars - based on 21 reviews

vodafone in talks to merge its indian business with rival idea cellular

Vodafone has confirmed that it is in negotiations for a merger of its Indian unit with Idea cellular, a deal which would create India’s biggest telecoms company.

Any financial aspects of the deal are yet to be released, but it would definitely create a new market leader that would be able to cope with the Indian market’s brutal price war in the telecom industry.

UK-based Vodafone affirmed the media speculations of the mega tie-up, causing its share to rise by 3 percent to 199 pence in early trading in the London Stock Exchange. Idea Cellular shares went up by 29 percent to INR 100.5 (117.5 pence) following the announcement.

India’s leading mobile operators – Bharti Airtel, Idea cellular and Vodafone, have been witnessing their sales plunging down since the arrival of Reliance’s Jio Infocomm, owned by India’s richest billionaire Mukesh Ambani. This launch last year has shaken the vastly growing Indian digital market by providing free voice and 4G data to customers.

All three leading operators stated above have already slashed their prepaid tariffs for calling and internet packs to compete against Jio. Vodafone dropped its data price by 14 percent to tackle this competition.

Vodafone also said that this would an all-share merger between the two companies, excluding Vodafone’s 42 percent stake in Indus Towers.

More recently, India is seen as becoming a trouble spot for Vodafone with a series of losses. Vodafone has already posted a surprising $5 billion write-down of its India business last year, blaming increased competition in the country. The company is now on a verge of posting its first operating loss in India, for the first time in last ten years.

Notably, Vodafone has been in a spat with the Indian government ever since it paid $11 billion for a 67 percent stake in Hutchinson Whampoa’s Indian mobile phone business in 2007. Last year, the government warned Vodafone that it may seize the company’s assets in India if it does not pay a disputed amount of INR 142 billion tax bill.