AP Photo/Rafiq Maqbool
Vodafone India has agreed to merge with fellow Indian mobile carrier Idea Cellular in a $23 billion transaction. Vodafone would hold a 45.1% stake in the combined company, while Idea's majority shareholder (Aditya Birla Group) would own a 26% stake. The remaining 28.9% position would he held by other Idea Cellular shareholders.
Why it matters: This merger would create the largest telecom company (nearly 400 million customers) in the world's second largest mobile phone market (behind China). It also comes amid major turmoil in the Indian mobile market. Current leader Bharti Airtel last week canceled plans to sell a control stake in its mobile tower unit, largely because of a stock price plunge related to the Vodafone India/Idea Cellular merger talks. And all three companies have been under severe price pressure after India's richest man spent around $20 billion to build out a network that has been offering its consumer services for free.
Bottom line: "Since the merged entity will have more resources, the telecom price war is going to get messier. Idea-Vodafone merger may lead to more consolidation. Reliance Communications, Tata Teleservices and Aircel are already in talks for merger. Airtel has bought India operations of Telenor. Reliance is surely going to face stiff fight from the new biggies. The consumer will be the king." Economic Times