Reliance Jio to face tight competition as Telecom giants Idea and Vodafone talks for merger
New Delhi, Jan 30: Vodafone has confirmed its plans to merge with the Idea cellular. The merger would create India’s largest telecom company, which could affect severely to the business of Reliance Jio. Shares of Idea Cellular surged 25 per cent intraday on Friday after London-based parent of Vodafone India confirmed that it is in discussions with the Aditya Birla Group about an all share merger of Vodafone India.
The merger would be effected through the issue of new shares in Idea to Vodafone and would result in Vodafone deconsolidating Vodafone India.Vodafone said that it is in talks with Aditya Birla Group on all share merger of Vodafone India and Idea Cellular. Any merger would be effected through new share issue in Idea to Vodafone. The merger of British giant Vodafone and the Aditya Birla Group company Idea—No. 2 and No. 3, respectively—can change the recent telecom game which began with with Reliance Jio’s entry into $26 billion Indian telecom market riding on big freebies.
So far, Reliance Jio has been seen as a challenge to Airtel, the No. 1 company. But the Vodafone-Idea merger can relegate AirtelBSE 9.97 % to No. 3 position. It would be mighty difficult for Reliance Jio to beat the new No. 1 company that would be born after the merger.
It would have a revenue market share of nearly 40 per cent compared with Airtel’s near-32 per cent. Emergence of as big a player as the merged entity will upset all present calculations. It would be seen how long Reliance Jio can go with its aggression.
If Reliance continues its innovation, it will hit Airtel more than the consolidated entity which would have the benefits of market share as well as spectrum holdings. Talks between Vodafone and Idea to explore a merger have been on for some time. Idea’s decision to postpone its January 23 meeting to consider third-quarter results had added fuel to the speculation.