Idea Cellular says reports of merger with Vodafone 'baseless'
Shares in Idea closed 6.9 percent higher on August 23 after the TV channel said the two sides were exploring the possibility of a merger. Photograph: (Reuters)
Idea Cellular, India's No 3. mobile phone carrier, on Tuesday strongly denied a report that it was in exploratory talks about a merger with larger rival Vodafone India and termed the news "baseless and absolutely false."
A spokeswoman for Idea's parent conglomerate, the Aditya Birla Group, said in an email that the company had "no such intent" and that the report by CNBC TV18 was "absolutely untrue and preposterous." Idea's closed 6.9 percent higher on Tuesday after the TV channel said the two sides were in talks, citing unnamed sources.
Vodafone India, India's No. 2 operator by market share and the local arm of Britain's Vodafone Group Plc, has declined to comment on the report.
"Both of them are struggling with their data revenue market share and ahead of a big competitive change in the industry they might want to get bigger," IDFC securities analyst Abhishek Gupta said of Idea and Vodafone India.
Any such deal would also face tough regulatory scrutiny and analysts say approvals would be unlikely, as the companies would breach the 50 percent revenue market share limit in many regions of the country if they did try to merge.
"It's very unlikely," PhillipCapital (India) analyst Naveen Kulkarni said, citing the regulatory hurdles.
"I'm doubtful whether this can go through but there could be some other form of merger, such as spectrum-sharing deals," he added.
Industrialist and India's richest man Mukesh Ambani's telecom venture, Reliance Jio, is set to give them competition once it launches its commercial operations in the coming months.
India is the world's second-biggest mobile phone market by subscriptions, behind China, but high competition in the crowded market has kept profits under pressure.