Top sources at Vodafone and Idea Cellular have denied any possible merger with Mukesh Ambani-promoted telecom startup Reliance Jio saying the debts are already high, and there are revenue share and spectrum holding caps.
Media reports surfaced on Monday saying that Vodafone is considering a possible merger after Reliance Jio intensified competition, which some said could lead to a price war in the telecom industry.
“It is not possible… The law of the land doesn’t allow this. There are spectrum holding caps and revenue market share (RMS) caps,” the source at Vodafone said.
A top source at Idea, too, denied any talks with any large telecom operator. “It’s mismatched DNA (with Idea or Jio),” the source said.
The telecom industry in India is already reduced to a four players game -- Reliance Jio being the new one, and Bharti Airtel, Vodafone and Idea as the incumbents. Marginal players such as Reliance Communications, Aircel and Telenor are already looking at probable consolidation.
Hindustan Times reported earlier that Telenor is in advanced discussions with Idea. Aircel and Reliance Communications have already decided on a merger. However, a recent ruling from the Supreme Court against Aircel promoters might become a roadblock.
The Vodafone source also said, “the telecom industry is in high debt, and there is almost no space to add more debt.”
The combined debt of all telecom operators put together is already Rs 3,85,000 crore. The companies are also spending millions of dollars in 4G rollouts.
This also means that the price war because of Reliance Jio’s free 4G services will only increase in the days to come.
Bharti Airtel had filed a petition with Telecom Disputes Settlement and Appellate Tribunal (TDSAT), the telecom tribunal, as apex telecom regulator Telecom Regulatory Authority of India (TRAI) allowed Jio to continue free services.
Last Friday, TDSAT asked TRAI to come to conclusion on the matter within “reasonable time”.
Reliance Jio has separately moved court against Airtel, Vodafone and Idea, alleging they have formed a cartel.Vodafone has separately challenged TRAI’s recommendation of levying Rs 1,050 crore penalty on denying points of interconnect to Jio, in court.
The Indian telecom industry has already gone through two rounds of price wars -- the first one was when Reliance Communications in 2002 launched Monsoon Hungama and gave mobile connections with handsets at Rs 500. The second one was in 2009 when Tata Docomo started a mega price war with the one-paisa-per-second tariff.