Aditya Birla’s Idea Cellular and Vodafone India have officially merged. The Department of Telecommunications (DoT) gave its approval to the merger in a letter to both the companies on Thursday, making Vodafone Idea the largest player in the telecom industry in terms of subscriber base and revenue.
"I think it is an exciting journey ahead of us with Idea Cellular and Vodafone India coming together and the actual work starts now. We are very optimistic about it,” said Kumar Mangalam Birla, executive chairman of the new company.
The merger sent jitters across the industry that has been dominated by Bharti Airtel for over a decade now, but analysts see it as a consolidation of the telecom industry. “It is good for the customers and it brings further clarity in the sector,” said Ashok Aggarwal, former director general of the Telecom Equipment Manufacturers Association (TEMA).
They added that they do not see the merger denting the competition anytime soon. “It is just an announcement. How well will the operational and cost synergies between the two companies be is something that needs to be seen,” says Harsh Walia, associate partner, Khaitan & Co.
Walia said it will take at least two years for the new company to be fully operational as the nitty-gritty details of the deal are being ironed out. "There are decisions to be taken that will take time to execute. Details regarding tower deals, workforce optimisation, go-to strategy needs to be worked out,” he noted.
It's too early to write off Bharti Airtel even though it has been edged out of the top slot because it has successfully survived the aggressive onslaught by Jio and other players in the industry. The former market leader has also been investing in building its infrastructure.
Jio's customer acquisition strategy has helped it grow its 4G subscriber base to 215 million in just a little over a year-and-a-half of its existence even though it was a late entrant into the industry. The company has invested in Jio GigaFiber services that will enhance data speed. Jio has made the core investment in its infrastructure for Jio GigaFiber while building the mobility network, something that no other teleco has done so far. “Vodafone Idea needs to also do spectrum optimisation,” Walia said.
But the Vodafone-Idea merger is still a win-win. Idea will gain from Vodafone’s enterprise business while Vodafone will be able to strengthen its services where Idea has a stronger position. After the merger, Vodafone Idea’s worth will be $23 billion with a market share of 35% while the subscriber base has risen to 450 million.
“Customers could go for Vodafone Idea for better services while Jio would be preferred for value for money,” said Neil Shah, telecom analyst with research firm Counterpoint.