Vodafone seals No1 India deal
VODAFONE has dialled up a $23billion (£18.5billion) deal to merge its Indian business with a leading rival to create the country’s biggest mobile phone operator.
The tie-up between Vodafone, India’s second biggest operator, with number three player Idea Cellular will give the combined group nearly 400million customers and a market share of 35 per cent in the world’s second largest mobile phone services market by users after China.
Consolidation in the Indian market is being driven by an aggressive push into the telecoms sector by oil products group Reliance Industries. Its Reliance Jio 4G mobile broadband network was launched last year, offering free calls and discounted data services in a bid for rapid growth.
Fierce competition forced Vodafone, which launched in India a decade ago and had previously considered a flotation, to write down the value of its Indian business by more than £4billion last November. The firm, which will own 45.1 per cent of the combined group after transferring a stake of 4.9 per cent to Idea’s parent company Aditya Birla, said the deal, expected to close next year, would deliver “substantial” cost savings. Aditya Birla has the right to buy more shares from Vodafone to increase its 26 per cent holding.
Vodafone chief executive Vittorio Colao said: “The combination will create a new champion of Digital India founded with a long-term commitment and vision to bring world-class 4G networks to villages, towns and cities across India.
“The combined company will have the scale required to ensure sustainable consumer choice in a competitive market and to expand new technologies, such as mobile money services, that have the potential to transform daily life for every Indian.”
John Colley, of Warwick Business School, said the deal would likely trigger a spate of mergers between other competitors: “The logic behind telecoms mergers is indisputable. In effect mobile telecoms is infrastructure and the winner in such a market is the business with the greatest market share. They can put the biggest volume of users through their infrastructure, which is effectively fixed cost, minimising cost per user.”