Idea and Vodafone Merger: Big in the Telco Industry

The inevitable is happening. Even as Reliance Jio Infocomm Ltd readies to launch its mobile services on a commercial basis from April 1, the second and the third largest operators – Vodafone India and Idea Cellular – have finally come together to occupy the number one slot in the world’s second largest telecom market by number of subscribers. The combined entity will be India’s largest in terms of revenues, absolute profits, subscriber base and several other parameters.

The combined entity will have an annual turnover of Rs 81,400 crores and around 400 million subscribers. It will have 35 percent customer market share and 41 percent revenue market share. As against this, Bharti has annual mobile revenues of around Rs 56,000 crores and 270 million mobile subscribers and. All this gives Bharti a customer market share of 24 percent and a revenue market share of 28 percent.

When it comes to the all-important spectrum holding, based on weighted average of a circle’s total revenues and levelling paired and unpaired spectrum, Vodafone-Idea will have 43 Mhz of spectrum followed by Bharti’s 34 Mhz.

But the real fight is not really between the combined entity and the numero uno so far -- Bharti – that they will displace. It is between the rest and the challenger that is Reliance Jio. The merger is a natural outcome of the market forces that the Reliance Industries subsidiary has unleashed – one that has brought data tariffs to one-fourth of their levels only six months ago and has made voice services almost free.

The anxiety of the incumbents was understandable. After all, if the fears needed any corroboration, Reliance Jio acquired 100 mln users in 170 days – a world record in its own right. Bharti too is in the process of acquiring the Indian unit of Norway’s Telenor.

No wonder Thomas Mathew, Director General of the industry lobby Cellular Operators Association of India, feels the tariff war in data services is far from over.

“Tariff wars in voice are over. That will happen around data. Pressure on data will continue,” he told Moneycontrol.

According to research firm IDC, the total mobile services market revenue in India is expected to touch USD 37 billion in 2017.

It’s rare to see an operator – in this case one that is yet to launch its services commercially as written earlier --  shaking up the market in a manner like this. But it has happened. The challenger is setting the terms in the market.

Article Source: Money Control
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