On
Monday, Vodafone announced plans of merging with another telecom biggie Idea
Cellular, a company run by Kumar
Mangalam Birla. If this merger is successful, the face of the telecom industry
will completely change, don’t you think so?
With free
services, Jio had already captured the entire market and had acquired over 70
million subscribers. With this, it had become the fastest growing telecom
company all across the globe. However, with the Vodafone-Idea merger, the
scenario might drastically change.
This
move was warmly welcomed by Airtel; Sanjay Kapoor, the ex CEO of Bharti Airtel
stated that this consolidation will bring about an improvement in the
sustainability and the financial health of telecom industry and will
drastically improve customer experience and coverage quality.
However,
this deal will not only pose threat to Airtel but will bring serious challenges
to Reliance Jio as well. Since this deal is finalized, there would be lot of
opportunities and challenges.
Both the
companies will have to follow certain terms and conditions for cracking the
deal. As of now, what’s revealed by Vodafone is that the merger has an
all-stock deal which gives Idea the due shares. Moreover, Idea will issue new
shares as well. In this deal, Idea as well as Vodafone will have equal rights.
With
this combined entity, the subscriber base will reach 395 million and the share
would be around 40% in the market. According to the analysts, the deal will
complement each other very well; the Indian unit of Vodafone is very strong and
considerable cost cutting will be possible with regards to network operating
costs or capital spending.
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