Vodafone, Idea to merge in India

Britain’s Vodafone Group and Idea Cellular agreed on Monday to merge their Indian operations to create the country’s biggest telecoms business amid a price war initiated by rival Reliance.

The combined group would have a 35 percent market share, with an implied enterprise value of 828 billion rupees ($ 12.66 billion) for Vodafone and 722 billion rupees for Idea.

“The combined entity will become the leading challenger with the scale to compete more effectively,” Idea said in the statement.

India’s mobile industry was thrown into turmoil with the launch last year of Reliance Jio Infocomm, the new fourth- generation mobile broadband network built at a cost of more than $ 20 billion by India’s richest businessman, Mukesh Ambani, as part of his Reliance Industries conglomerate.

Jio has made an impact with free voice calls and cut- price data services, forcing India’s three biggest operators – Bharti Airtel, Vodafone and Idea – to slash prices and accept lower profits.

“Consolidation is a much anticipated and very welcome development in this beleaguered telecom sector,” said Arpita Pal Agrawal, a partner and telecom analyst at PwC India.

Vodafone entered India in 2007, but fierce competition and a high- profile tax battle had made a business contributing more than 10 percent of its revenues and profits its most unpredictable by far.