Completion of Vodafone/Idea merger takes Indian mobile market from 11 to three

31 August 2018 | Alan Burkitt-Gray

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The merger between Vodafone India and Idea Cellular went ahead today, just hours after India’s commercial court gave final approval.

The newly named Vodafone Idea will have 408 million customers, making it the largest mobile operator in India. The board of the merged company met for the first time this morning.

“Today, we have created India’s leading telecom operator,” the board chairman, Kumar Mangalam Birla, told the Times of India. “It is truly a historic moment. And this is much more than just about creating a large business. It is about our vision of empowering and enabling a new India and meeting the aspirations of the youth of our country.”

According to reports from India, the new combined company will be officially launched on Monday 3 September. Birla said: “As Vodafone Idea, we are partnering in this initiative by building a formidable company of international repute, scale and standards.”

The merger turns India into a three-operator market – with Airtel and Reliance Jio competing with Vodafone Idea after a long period of consolidation – and makes it comparable in competitive terms with China, Japan and – if the Sprint/T-Mobile merger goes ahead – the US. That could allow the three survivors to reduce price erosion that has hurt the business.

Earlier in the consolidation process, Airtel acquired Tata Teleservices and Telenor India. Reliance Communications (RCom) acquired MTS India, which was controlled by Russian industrial group Sistema, but is midway through the process of selling its operations and spectrum to Reliance Jio, owned by Reliance Industries. An eleventh operator, Aircel, filed for bankruptcy protection in February 2018.

Vodafone Idea, which has an estimated 34.7% market share, is jointly controlled by Vodafone and the Aditya Birla group. The chairman of the board of Vodafone Idea is Kumar Mangalam Birla and the board has appointed former Vodafone India COO, Balesh Sharma, as the CEO.

The Vodafone group will own a 45.2% stake in Vodafone Idea and Aditya Birla group will own a 26.0% stake. Aditya Birla is India’s third largest conglomerate, behind the Tata group and Reliance Industries.

Vodafone Idea will also have the option to monetise Idea’s 11.15% stake in Indus Towers on completion of a planned merger of Bharti Infratel and Indus Towers, expected before the end of the financial year ending 31 March 2019. The Vodafone group will also separately hold a 29.4% stake in the combined tower company.