Idea-Vodafone Merger is a No Go

BENGALURU: Over the past few days, there were reports about a possible merger between India’s two telecom majors, Idea and Vodafone. The reports said that the merger would create India’s largest telecom company worth a collective market value of $16 billion. However, the Aditya Birla Group, parent company of Idea cellular has come out with a statement clearly denying any such speculations.

"Regrettably, there's a wrong-headed and baseless story stating that Idea is in talks with Vodafone on stake sale. This is absolutely untrue and preposterous. There's no such intent," a spokesperson for Aditya Birla Group said in the statement. With the entry of Reliance Jio, the telecom industry is on course for fierce competition and this might have led to bankers speculating about the idea of a merger - sources told Times of India.

In addition, the merger will face numerous technical hurdles, as a combined telecom entity is not permitted to have more than 50 percent market share in any circle. If such a merger happens, the resulting entity’s spectrum share will exceed the limits in at least 7 circles. “While any consolidation in the sector is a positive, the Idea-Vodafone merger will not be an easy one, given that there is significant overlap between the two," a Credit Suisse report noted.

Also, the speculation comes at a time when Vodafone is preparing to list its Indian unit on the stock market in early 2017. The proposed IPO is expected to raise $2.5-3 billion, offering the company a valuation of around $11 billion. On the other hand, it has not been in a good year for Idea Cellular in terms of stock market value. Its share prices have seen a massive fall from Rs 144 in December to about Rs 100 now. In spite of this, the reports of a merger boosted the company’s share prices by 7 percent when other indices were trading almost flat.

Read Also: Top Selling Smartphone Companies of 2016
'Global Investments For Developers Acquire Projects'