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Vodafone gets an Idea to take on Jio

UK-based telecom giant Vodafone Group Plc on Monday confirmed that it was in talks with Aditya Birla Group for an all-share merger of its Indian telecom entity with its smaller rival Idea Cellular.

If this goes through, the Voda-Idea combine will surge ahead of the current market leader Bharti Airtel in terms of both revenue (43%) and consumer (40%) market shares to become the largest telecom player in the country.

As per the data published on the Telecom Regulatory Authority of India (Trai) website, Bharti Airtel had revenue market share of 33% and active subscriber share of 26% during the first half of the current fiscal.

The British telecom service provider informed that the merger deal will not include its 42 per cent stake in Indus Towers.

“Any merger would be effected through the issue of new shares in Idea to Vodafone and would result in Vodafone deconsolidating Vodafone India. There is no certainty that any transaction will be agreed, nor as to the terms or timing of any transaction. This announcement contains inside information,” said a statement issued by Vodafone.

The merger could see the already fired up telecom sector getting into a fiercer battle for market share. Mukesh Ambani-owned Reliance Jio has escalated the competition by offering free voice and data services to grab over 100 million subscribers in shortest possible time.

Ashish Sharma, partner, PwC India, said such a development will change the landscape of the Indian telecom by making it a “three-way game” between Bharti Airtel, Voda-Idea and Reliance Jio Indian Ltd (RJIL) as against the “two-way game” between Bharti Airtel and Rel Jio being played right now.

“Rel Jio will now be facing two better positioned players than one better positioned player and two relatively weaker players,” he said.

The PwC telecom expert said the consolidation of Voda and Idea businesses has been expedited because of Rel Jio’s aggressive strategy for garnering market share.

“What should have happened over 2-3 years is now happening in one year because of Rel Jio. So, Jio has precipitated that carnage,” he said.