It is not easy for any telecom operator to survive and prosper in the highly competitive Indian telecom market. As if things were easier earlier, they got worse after the entry of Reliance Jio. Now according to the latest reports by Telegraph, Vodafone is looking for a merger partner for its Indian unit.
Vodafone is eyeing a merger with either Reliance Jio or Idea Cellular, but it has not been confirmed by either of these entities. Vodafone has been trying its best to fend off the competition but all its efforts are being slaughtered by its competitors.
“Vodafone is weighing a potential merger of its Indian arm with rivals as it seeks a turnaround in the sub-continent’s cut-throat mobile market,” the report said.
Earlier Vodafone India followed the footsteps of Reliance Jio and Airtel by launching truly unlimited voice and data combo plans. It has also recently launched ‘SuperHour’ packs offering unlimited data and voice benefits to its subscribers. But long story short, this is not generating enough profits for Vodafone to sustain in this cut-throat competition.
Whenever competition becomes so tough, consolidation of the market takes places through mergers and acquisitions. The current situation of the Indian telecom market looks similar to this and we might soon see the market reduced to a few players formed by acquiring and merging with the current players.
If Vodafone happens to merge with Reliance Jio then it would leave Airtel struggling to gain market share. This would create give a huge competitive advantage to Reliance Jio. On the other hand, if Vodafone merges with Idea Cellular then it would create a level-playing field for the new entity (Vodafone & Idea), Airtel, and Reliance Jio.
Vodafone is bleeding red across the globe and has cut the valuation of its Indian unit by €5 billion due to increased competition in its local market. Vodafone India has also postponed its plan to come out with an IPO.
“Vodafone’s parent, in November, had cut the valuation of its Indian unit by €5 billion citing increased competition, which had caused its global loss to double. The telco also delayed its plan to launch an IPO to be listed on stock exchange in India,” the report said.
Due to the sharp cut in its valuation, we are witnessing the launch of lucrative plans by Vodafone India so it can get back to its original valuation soon.
We are waiting to see how others respond to this news but one thing is certain, this is the beginning of the telecom market consolidation in India and those with the deepest pockets have an advantage over the others.