(Last Updated On: January 31, 2017)

The merger of Vodafone India and Idea Cellular, India’s #2 and #3 telecom operators, is not just a rumour anymore. Vodafone India has confirmed that it is in talks with Aditya Birla Group about an all share merger of Vodafone India and Idea Cellular.

Telecom India

“Vodafone confirms that it is in discussions with the Aditya Birla Group about an all share merger of Vodafone India (excluding Vodafone’s 42% stake in Indus Towers) and Idea,” a statement issued on behalf of Rosemary Martin, Vodafone Group General Counsel and Company Secretary.

It is worth noting that this would be a merger of just the telecom operators and not of their tower businesses. Airtel and Vodafone both have 42% stake each in Indus towers, while Aditya Birla Group owns the rest of 16%.

According to the statement, Vodafone India and Idea Cellular are discussing the merger and may or may not arrive at a decision. However, if the merger is agreed to then Idea will issues new shares in the combined entity to Vodafone.

Idea Cellular also confirmed these discussions for putting an end to various speculations.

“It (the group) constantly evaluates various opportunities for enhancing the stakeholders’ value. As a part of the exercise, the company has been in preliminary discussions with Vodafone,” said Aditya Birla Group Company.

How Will The Vodafone-Idea Merger Affect The Telecom Industry?

Jio is currently disrupting the Indian telecom industry, but the merger (if it happens) will have much greater effects and will shake up the entire industry.

Post the merger, the combined entity (Vodafone-Idea) will become the leading telecom operator in the country dethroning Airtel as the market leader. It will then give stiff competition to Reliance Communications, BSNL, and Jio.

“Jio’s free services may have accelerated consolidation, but it’s ambitions of becoming the No. 1player on the 4G front could prove an uphill task as it is likely to face a tough time poaching high-ARPU customers from a Vodafone-Idea combine, which would undoubtedly have comparable pan-India 4G spectrum resources, backed with strong marketing and distribution networks,” said EY’s Prashant Singhal.

Sunil Bharti Mittal, Chairman at Bharti Enterprises said that the merger would a perfect match for both the telecom operators.

“It’s a perfect match… But you know I can’t sit on the minds of Vittorio or Kumar. The strength and weaknesses match very well. Rural – urban, structured portfolio…makes for a good business case and I would support it,” Mittal said.

The merger would also be good for the telecom industry in the long-term as it would place Vodafone-Idea (combined entity) in a good position to compete against Jio and Airtel by investing more into the technology and better customer experience.

These are just initial impressions about the possible merger, but things might change drastically by the time the merger actually happens which might take some 12-18 months.

We will let you know as more details come in about this possible merger. Stay tuned on ITN!