Gopal Vittal, MD and CEO of Bharti Airtel, has responded to the discussion between Vodafone India and Idea Cellular for a possible merger.
The merger will create the largest telecom operator in India in terms of mobile subscriber base and revenue — ahead of Bharti Airtel.
“We welcome the news of the proposed alliance between Vodafone and Idea Cellular. Consolidation is good, especially for any capital intensive sector with multiple players. A few solid and profitable players are always better for an industry, as they can make substantial investments and offer quality products and services to customers in a sustainable fashion,” Gopal Vittal said.
Gopal Vittal said it is important to ensure that such consolidations are not an outcome of a forced situation created by offering an unfair playing filed to any particular company while completely destroying the viability of the others.
“That would be an unfavorable situation, which is not only bad for the sector, customers and the employees, but will also adversely impact the overall investment climate and above all revenues to Government,” Gopal Vittal said.
The merger will create an entity with a subscriber base of more than 400 million to emerge as the largest player in India, replacing the current dominant player Bharti Airtel, which currently has over 260 million users on its network.
“Given the financial pressure and dynamics in the telecom sector consolidation is imperative. It is good for both industry and consumers,” Rajan S Mathews, director general of Cellular Operators’ Association of India.
Mathews said the merged entity of Vodafone and Idea Cellular will have 43 per cent of the revenue market share.
“The merger confirms the trend towards consolidation. It shows that the companies recognise the nature and size of the challenge posed to their businesses by Jio. This will help both companies to improve their competitiveness,” Mahesh Uppal, Director, telecom consultancy firm Com First.
“Going forward there will be a reduction in number of players to four and consequently a decrease in the competition in the sector. This is not necessarily good for consumers in the short term. In the medium term, these consolidations will make the sector a bit a more stable,” Mahesh Uppal said.
“Both Vodafone India and Idea have to figure out their long term business strategy and merger could well be the path, given current industry competitiveness and dynamics,” said Amresh Nandan, research director at Gartner.
“We believe that a potential Idea and Vodafone merger could make strategic sense. The merger would result in the combined entity facing practical implementation issues, the most significant of them could be the cost associated with liberalizing the spectrum. The combined entity would also breach spectrum caps in 5 circles, the market value of which comes to Rs 75 billion,” said Bank of America Merrill Lynch.
“This merger could unlock more than $9 billion in potential synergies and offer an elegant route to deconsolidating India, thereby helping focus (Vodafone’s) attention back onto a rebounding European equity story,” investment banker JP Morgan said.
