India’s number two and three mobile operators by subscribers – Vodafone India and Idea Cellular – are expected to finalise a merger in weeks, which would create the country’s largest player with a 38 per cent market share.
Sources told The Economic Times (ET) the two operators are almost ready to sign a deal, which should not take more than a month, but they could announce a definitive agreement by the end of the week.
Vodafone Group brought in its ex-India chief Marten Pieters to work on a deal. Vodafone Group CEO Vittorio Colao is also expected to brief the operator’s business heads in India about the merger on a conference call next week, ET reported.
In late January Vodafone Group confirmed it was in talks to merge its Indian business with Idea.
Both operators have faced declining profitability after the entry of 4G upstart Reliance Jio in September. Last week Idea reported its first-ever quarterly net loss for its fiscal Q3. To hold onto its existing mobile subscribers, Idea said it was forced to reduce voice rates during Q4 by 10.6 per cent and cut its mobile data rates by 15.2 per cent.
The combination would create an operator with nearly 400 million mobile subscribers – market leader Bharti Airtel counts 264 million for a 25 per cent market share. Vodafone India had 203 million subs (19 per cent share) at the end of 2016, while Idea had nearly 189 million (18 per cent share), according to GSMA Intelligence.
Mobile newcomer Jio signed up 100 million subscribers in its first five months of operation.
While Vodafone and Idea’s spectrum holdings are mostly complementary, a merger would breach revenue market share, subscriber and spectrum caps in five service regions, ET said.
According to India’s telecoms M&A rules, an operator can’t hold more than 25 per cent of the spectrum available in an area or own more than 50 per cent of the spectrum in a specific band in a service region. One player also cannot have more than a 50 per cent market share by revenue or subscribers in a region.