The Idea-Vodafone Merger: What can you Expect?

Today we will talk about the Idea-Vodafone Merger deal. It was September 2016, when Reliance Jio stepped into the Telecom market and changed its face for good. Jio launched 4G in India which was cheaper than 3G of other telecom companies. As a result, all telecom companies began to drop their data rates. This can happen because of the intense competition Reliance Jio caused in the industry. Now, it’s been around 2 years since the launch, but Jio is still one of the largest telecom companies in India. Well, the same can’t be said anymore as the two big names in the telecom industry right now, Idea & Vodafone, are merging together to form a new alliance “Vodafone-Idea Ltd.”

The Idea-Vodafone Merger: What can you Expect?

The Idea-Vodafone Merger deal is definitely one of the biggest deals in the history of the telecom industry. This deal was first announced on March 20th, 2017. Now, this merger is at the final stage of acceptance. The Idea-Vodafone Merger is expected to be finalized in the upcoming months or even sooner. According to the Aditya Birla group firm which are the current owners of Idea Cellular Ltd., “Vodafone Idea” is the name which has been finalized for the upcoming establishment. The new firm will be formed after the successful completion of the Idea-Vodafone merger. Vodafone India and Vodafone mobile services will invest all their current business and assets in this newly formed company.

Speaking of the shareholding conditions, Vodafone will hold 45.1% of the total shares of “Vodafone Idea”. The Aditya Birla Group will own 26% and the remaining shareholder of Idea will own 28% of the company.

The Probable outcomes of the Idea-Vodafone Merger Deal

There’s no doubt that this newly formed entity might become the largest telecom operator in India. After the Idea-Vodafone merger deal, the customer count of the company will be around 400 million. Hence, the “Vodafone Idea” will deal with around 35% market shares and 41% revenue share. The company will be utilizing 34 3G and 129 4G carriers across the country. The most profitable outcome for Vodafone is that their net debt will be reduced by nearly Rs.55,000 crore. As the company will own the majority of market shares, it will allow them to compete with the other operators as well. They will do so by providing customers with innovative and attractively priced cellular services. Apart from this, it will be beneficial for the Digital India mission as well. As it will support the expansion of wireless broadband networks across the country.

Also read: Idea Cellular launches Idea VoLTE service in six circles; offers free 10GB data

The Pros and Cons of the Idea-Vodafone Merger for the customer

In the end, everything comes down to the benefit and response of the consumers. The following enlists the pros as well as cons of the Idea-Vodafone Merger deal:

Pros of the deal:

Better network quality. After the deal, the network will be extended vastly across the country. Because of this, users will experience a lot better and stronger network. Network quality is a very important aspect of a network which will be improved with this deal.
Better customer experience. The company is likely to increase the quality of their product and communication services after the Idea-Vodafone merger. Hence, the customers will surely receive comparatively better experience.
Cheaper tariff rates. The revised tariff rates after the completion of the Idea-Vodafone merger is expected to be cheaper than before. Because the purpose of this merger is to obtain a strong grasp of the market and consumers. Still, as a consumer, you can look forward to cheaper data rates and service charges.
The occurrence of more mergers. The Idea-Vodafone merger will surely have a large impact on the mobile networks industry. This merger will push more companies to form alliances for the betterment of their own companies. This would have a positive impact on users as it will create intense competition in the market causing drops in tariff rates.

Cons of the deal:

The Idea-Vodafone merger deal might contain some negative results as well.

This whole deal might turn out to be a monopoly for the betterment of their companies. This means that there won’t be any significant changes from the customer’s perspective.
Even though the deals turn out to be in favor of current Vodafone or Idea customers, it will definitely cause some unsatisfactory impact on other telecom users.
Some technical problems may also arise at the beginning of this new company. This will result in the irritation and inconvenience on the consumer side.

Changes in the current Telecom scenarios

As it is the biggest deal in the history of the telecom industry, it’s destined to cause some remarkable effects on the overall telecom industry like:

After the Idea-Vodafone merger, the “Vodafone-Idea” can become the no. 1 conglomerate in the industry. This can place “Bharti Airtel” at the second place which is the current top telecom industry in the country.
The “Vodafone-Idea” can have the maximum user base in the country which is around 39 crores.
After the deal, the company will hold nearly 41% of the market’s revenue share. Because of this, the market value of other companies might start to fall.
If the company decides to increase their user base, they are likely to ignite a tariff war. This will cause a significant drop in the current tariff rates throughout the industry.
Although the complete opposite of this can also happen if the remaining companies join together to jack up telecom rates to increase their profit.

Final Verdict

This is definite that the deal is happening and it’s bringing drastic changes in the current telecom scenario. This is probably the biggest consolidation since the launch of Reliance Jio back in 2016. These changes might be either in the favor of users or disfavor, but is surely something to look forward to.

So, that’s it guys, this was our take on the Idea-Vodafone Merger. We hope that you found this post useful. Let us know what do you think about the merger in the comments section down below.

Abhinav Jain