SAN FRANCISCO (Diya TV) — Vodafone confirmed Monday that the company is in talks to merge its Indian subsidiary with a local competitor, Idea Cellular, in an all-share deal that will create a company more suited to compete in the country’s brutal new price war.
Already the world’s second-largest cellphone operator, Vodafone has endured a tumultuous ride since it embarked on its India journey in 2007. And there’s no guarantee of a merger, the company said.
“There is no certainty that any transaction will be agreed, nor as to the terms or timing of any transaction,” the company said on Monday of its talks with Idea.
India’s telecom market was thrown into fresh turmoil last year with the launch of Reliance Jio Infocomm, the new 4G mobile broadband network built at a cost of more than $20 billion by India’s richest businessman Mukesh Ambani. Jio has had an immediate impact on India, the launch of its free voice calls and cut-price data services forced the country’s three largest operators —Bharti Airtel, Vodafone and Idea — to slash prices and accept lower profits.
Jio’s assault on the market forced Vodafone to take a $5 billion writedown on Vodafone India last year, prompting chief executive Vitorio Colao to say at the time that the market would have to consolidate.
“I think consolidation is the answer,” he said. “You cannot defy the rules of economics.”
According to Berenberg, a merger between Vodafone and Idea would create a single network with about 375 million subscribers, which equals around 36 percent of the market. That’s far ahead of Bharti’s 260 million subscribers.
Idea said that the initial talks were based on equal rights between its owner, Aditya Birla Group and Vodafone, with Vodafone getting shares in Idea.
Information from Reuters contributed to this report.
