Reliance Jio launch pushes Vodafone to seek merger in India: Report2 min read . Updated: 09 Jan 2017, 08:06 PM IST
Vodafone India is weighing a potential merger with rivals as it seeks a turnaround in subcontinent's telecom market
New Delhi: The Indian unit of Vodafone Group Plc is seeking a merger with one of the top telecom companies in India following intensified competition after the launch of Mukesh Ambani-promoted Reliance Jio Infocomm Ltd, British newspaper The Telegraph reported.
Vodafone is weighing a potential merger of its Indian arm with rivals as it seeks a turnaround in the subcontinent’s cut-throat mobile market, the newspaper reported on 7 January.
“Vodafone is now understood to be looking at the possibility of a tie-up with either Jio, or Idea, another of the top four providers. Jio and Idea could themselves combine, however," the report said.
Mint could not independently confirm the veracity of the report. Emails sent to Reliance Jio and Idea Cellular Ltd seeking comments remained unanswered till press time.
Jio’s aggressive tariff plans and massive investments have started impacting rivals. Experts have said that Indian telecom industry is set for a major round of consolidation with smaller companies (such as Telenor India) likely to be acquired and middle-level companies (such as Anil Ambani-promoted Reliance Communication Ltd and Aircel Ltd) looking for mergers. The entire exercise will leave space for a maximum of four companies in the sector.
“It is very unlikely for Mukesh Ambani to go for merger with Vodafone India because it is not (in) his DNA to write large cheques; his strategy is different. Birla group could likely be the one and the companies could opt for share swap. The conditions for that would be that Vodafone, as it is unlisted, will need to get valuation done and receive permission from Competition Commission of India," an industry executive said, on the condition of anonymity.
“With two decades of existence and almost a decade of being national operator, it is not too soon to expect merger for Vodafone and Idea," the executive added.
Vodafone India merging with another firm is unlikely; the company is too big for that. It could possibly go for a buyout, the executive added.
Vodafone India, which continues to be the country’s second-largest service provider after Delhi-based Bharti Airtel Ltd, has launched several new schemes to beat the competition. In September 2016, its parent invested Rs47,700 crore in the company, most of which was used to reduce its debt from Rs81,500 crore in March 2015 to Rs35,430 crore by the end of second quarter of 2016-17.
At the end of September 2016, Vodafone India had 200 million mobile customers. Despite a quarterly rise in its subscriber base, the company logged a 2% decline in voice minutes, though data usage increased by 9.8% on a quarterly basis.
In November, Vodafone’s parent cut the valuation of its Indian unit by €5 billion citing increased competition, which had caused its global loss to double. The UK-based telecom player also delayed its plan to launch an IPO (initial public offer) to be listed on stock exchange here in India.
In response to a Mint questionnaire, a Vodafone spokesperson said, “We never comment on speculation (regarding merger)... Regarding the IPO, we have never given a timetable for an IPO. We have said that we will IPO as soon as the market conditions allow, although we do not expect this to be in the current financial year." Vodafone has been planning to list on India’s stock exchange since 2010.