British telecommunications company Vodafone confirmed that it is in talks for a possible merger with India’s Idea Cellular- a tie-up which will lead to the country’s largest telecom company with a combined revenue of Rs. 80,000 crores.
If the deal goes through, it would result in an agglomerate that would be a major player in the telecom industry and would pose a serious threat to established as well as upcoming companies, such as Bharti Airtel and Reliance Jio respectively.
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Seemingly, the merger intends to cash in on Vodafone’s huge clientele in the metropolitan areas of the country with the addition of Idea’s rural stronghold.
The combined company is set have a market revenue share of 43% of the total subscribers in the country along with an estimated 40% of active subscriber share in the market.
Also, it will be accountable for at least 25% of the allowed spectrum and will, in order to be compliant with the spectrum rules and regulations, have to sell 1% of the same. Along with that, it will also require clearance from Competition Commission of India.
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There are, however, several hurdles that both the companies need to overcome if they are to make this merger a successful endeavor.
According to M&A regulations, spectrum holding of the merged entity should not be more than 25% across all bands and more than 50% in each band individually.
Further, the market share revenue of the company once the merger is done, should not be greater than 50% in any circle.
Looks like both the companies have their work cut out as a breach in spectrum regulations has already been seen in as many as five circles in the 900MHz.
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Additionally, if the merger does take place, the revenue market share of the resultant company is estimated to overshoot the 50% margin in at least six cities.
