This could be the biggest development in the Indian telecom industry for 2017. Country’s second largest operator Vodafone India today confirmed having discussions with Idea Cellular, the third largest operator, for a possible merger. The Vodafone-Idea merger speculation was doing the rounds for over a month now.
“Vodafone confirms that it is in discussions with the Aditya Birla Group about an all share merger of Vodafone India and Idea,” the company with the British origin said in a statement. However, the 42% stake it has in Indus Towers is excluded from this discussion.
Speculations regarding a possible merger of these two big telecom firms is going on for a month now with financial institutions advising both the firms reportedly confirming about it.
Though Vodafone has confirmed it, details about a possible merger is not yet clear and also the kind of transaction it will involve is not yet ascertained. However, Vodafone has said it will involve share transfer between the two firms.
“Any merger would be effected through the issue of new shares in Idea to Vodafone and would result in Vodafone deconsolidating Vodafone India,” the statement added.
Typical to any speculative M&A statement Vodafone said that ‘there is no certainty that any transaction will be agreed, nor as to the terms or timing of any transaction.’
This Vodafone-Idea merger, two of country’s largest operators, is a direct fallout of Reliance Jio’s entry to the telecom domain that has impacted the bottomline of all three big incumbent operators – Bharti Airtel, Vodafone India and Idea Cellular.
The ferocity of Jio’s impact can be measured from the Airtel’s Q3 results that were announced last week where the company’s net profit plunged to more than 55% and it is expected that the Q4 would be worse. Similarly, Idea Cellular halted its result announcement and postponed a board meeting last week anticipating a net loss of around Rs 500 crore for Q3 – a first for the company.
If the Vodafone-Idea merger happens it will change the dynamics of the Indian telecocm industry and will change the pecking order.