Vodafone’s (LON:VOD) Indian Unit and Idea Cellular (NSE:IDEA) have announced their intention to merge, following increased pricing pressures.
The merger is set to create India’s largest network, with around 35 percent of market share and an almost 400 million strong customer base.
“The combined entity will become the leading challenger with the scale to compete more effectively,” Idea said in a statement.
Following the merger, Vodafone will own 45.1 per cent of combined business and Aditya Birla Group, the majority owner of Idea, will own 26 per cent while other shareholders will own the remaining 28.9 per cent. The joint venture is set to hold a combined enterprise value of $23.2 billion.
Vittorio Colao, Vodafone’s chief executive, commented: “The combination of Vodafone India and Idea 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.”
Vodafone has faced strong competition from rivals, with India’s mobile industry becoming increasingly saturated. Over 10 telecom providers are attempting to attract India’s one billion mobile phone users, leading telecom operators in India lower tariffs, and impact the general probability for the sector.
This situation was only compounded by last year’s launch of Reliance Jio Infocomm. The new 4G mobile network cost more than $20 billion to set up and was backed by India’s richest businessman, Mukesh Ambani, as part of his Reliance Industries group.
Whilst shares initially bounced amid the announcement, shares in Idea Cellular are currently down 10.08 percent, alongside a 0.31 drop in Vodafone shares as of Monday at 11.15AM (GMT).