Idea-Vodafone merger: What’s in it for the customers - Hindustan Times
close_game
close_game

Idea-Vodafone merger: What’s in it for the customers

Hindustan Times, New Delhi | By
Mar 20, 2017 04:45 PM IST

While Vodafone and Idea Cellular will merge to become India’s largest telecom operator, its customers will also benefit from better infrastructure, better services and better tariffs of the combined entity.

While Vodafone and Idea Cellular will merge to become India’s largest telecom operator, its customers will also benefit from better infrastructure, better services and better tariffs of the combined entity.

Aditya Birla Group chairman Kumar Mangalam Birla interacts with Chief Executive Officer of Vodafone Group Vittorio Colao during the announcement of merger between Vodafone India and Idea Cellular.(PTI)
Aditya Birla Group chairman Kumar Mangalam Birla interacts with Chief Executive Officer of Vodafone Group Vittorio Colao during the announcement of merger between Vodafone India and Idea Cellular.(PTI)

All this perhaps wouldn’t have happened if Reliance Jio had not come into the fray with its free telecom services – to begin with, the Welcome Offer, and then its Happy New Year offer – and the company has promised to offer free voice calls, forever.

Hindustan Times - your fastest source for breaking news! Read now.

Customers of Idea Cellular and Vodafone do not enjoy these freebies – at least not free internet. Coming together, both Idea and Vodafone will have more fire power to retain customers, offer better tariffs, and provide better services.

“This move is in line with our view of the dire need for consolidation in a crowded mobile market. The entry of Reliance Jio and its hugely disruptive free distribution of SIM cards to rapidly build up scale are clearly proving to be a catalyst,” wrote Dhananjay Mirchandani and Chris Lane, analysts with Bernstein.

Some believe the merger is more beneficial for Idea users. “In a telecom industry that is likely to see migration toward an free voice regime spurred by Reliance Jio, Idea stands to be most vulnerable (given Idea’s higher percentage of rural, semi-urban subs who are not nearly as data-hungry as creamy subs in Metros and select Circle As, where Idea has relatively limited presence),” wrote Viju K George and Anshul Agrawal, analysts with JP Morgan.

Industry sources said that both Idea and Vodafone users will continue to use the respective services without any disruption. However, once the entities are merged, the customers will be migrated to the merged entity, like it happened to Hutchison Essar users, when it was bought by Vodafone.

This would lead to a messier price war as Vodafone and Idea will try to retail customers, and Reliance Jio will want to chip customers off from them. “We are very complimentary. Idea is strong where Vodafone is weaker. Vodafone is strong where Idea is weaker,” said Vittorio Colao, CEO of Vodafone Group Plc, at a press event in Mumbai.

Together Vodafone and Idea will have 400 million customers, and will combine towers, tenancies, payment banks, and wallets. “The combined company will have a very large canvas for its payment banking offerings to its existence 400 million existing customers,” said Kumar Mangalam Birla, chairman of Aditya Birla Group.

The companies will also focus to build a better 4G and 5G coverage in the years to come, which will be services of the future. “Sustained investment by the combined entity will accelerate the pan-India expansion of wireless broadband services using 4G,4G+ and 5G technologies,” Idea Cellular said in its statement.

However, as the price war settles down, the merger and fewer telecom companies with larger number of customers will allow operators to make significant amounts of money. “There is currently a tariff war in the market which may not be sustainable for long,” said Rajan S Mathews, director general of Cellular Operators Association of India.

The price war has impacted the revenue stream of operators, and has even resulted in the decline of revenue. “All these have put the financial condition of this industry at risk and increased the debt to Rs 4.3 lakh crore,” added Mathews.

Unlock a world of Benefits with HT! From insightful newsletters to real-time news alerts and a personalized news feed – it's all here, just a click away!- Login Now!
Stay informed on Business News along with Gold Rates Today, India News and other related updates on Hindustan Times Website and APPs
SHARE THIS ARTICLE ON
Share this article
  • ABOUT THE AUTHOR
    author-default-90x90

    Sunny Sen was part of Hindustan Times’ nationwide network of correspondents that brings news, analysis and information to its readers. He no longer works with the Hindustan Times.

SHARE
Story Saved
Live Score
OPEN APP
Saved Articles
Following
My Reads
Sign out
New Delhi 0C
Friday, March 29, 2024
Start 14 Days Free Trial Subscribe Now
Follow Us On