One month after Telenor of Norway announced plans to sell its Indian wireless unit to Bharti Airtel, Vodafone India agreed Monday to merge its mobile network operations with those of Idea Cellular to establish a single, unified entity, valued at US$23 billion, that will surpass Bharti as the largest wireless carrier in India.
Like last month’s pact between Telenor and Bharti, the Vodafone-Idea merger is viewed by analysts as a strategic response to the recent entry of upstart carrier Reliance Industries into India’s crowded wireless telecommunications sector. Since launching service last year, Reliance has quickly captured market share with deeply discounted voice and data service plans that have induced rivals not only to slash costs but also to seek the scale needed to compete effectively. Together, Vodafone and Idea would control 400 million subscribers (and a 35% market share) in a nation of more than 1.2 billion people. Touting the companies’ combined national spectrum holdings of more than 1,850 MHz, which provides enough spectrum depth “to accelerate the pan-India expansion of wireless broadband services on [4G and 5G] technologies,” Vodafone CEO Vittorio Colao predicted that the merged entity “will have the scale required to ensure sustainable consumer choice in a competitive market and to expand new technologies.”
Under the terms of the deal, Vodafone would emerge with a 45% stake in the merged entity while Idea’s majority shareholder, the Aditya Birla Group, would hold a 26% stake. The remaining 29% will be held collectively by Idea’s minority stakeholders. The parties expect to complete the transaction by late 2018.