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British mobile phone giant Vodafone's Indian unit will merge with Idea Cellular to create India's largest telecoms operator, the firms said Monday, as they combine to fight the rise of Reliance Jio.

“Vodafone Group Plc and Idea Cellular today announced that they have reached an agreement to combine their operations in India,” they said in a statement to the Bombay Stock Exchange (BSE).

“The combined company would become the leading communications provider in India with almost 400 million customers, 35 per cent customer market share and 41 per cent revenue market share,” the statement added.

The confirmation ended months of speculation that the two operators were ready to sign a deal to help fend off Reliance Jio, whose recent arrival has shaken up India's ultra-competitive mobile network market. Reliance Jio, which began operations last year, is owned by India's richest man Mukesh Ambani.

The 4G Jio network launched in September with an audacious free service for the rest of 2016, followed by vastly cheaper data plans and free voice calls for life.

It forced rivals to dramatically slash their tariffs and left them scrambling to match the deep pockets of Jio, which is backed by India's hugely wealthy energy-to-chemicals conglomerate Reliance Industries.

Shares in Idea rose almost four per cent in Mumbai following announcement of the deal, which will see the combined company overtake Bharti Airtel as India's largest telecoms operator.

Vodafone will hold 45.1 per cent of the merged entity while Idea will hold 26 per cent. The agreement excludes Vodafone's 42 per cent stake in Indus Towers.

The merged firm will be worth $23.2 billion, based on the combined enterprise value of $12.4bn for Vodafone India and $10.8bn for Idea Cellular, according to Bloomberg News.

The companies will be able to nominate three directors each, the statement said.

Global brokerage firm CLSA has estimated that the Vodafone-Idea tie-up would command a revenue market share of 43 per cent by the start of the 2019-20 financial year, ahead of Airtel on 33 per cent. Jio would have 13 per cent.

“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,” Vodafone Group chief executive Vittorio Colao said in the statement.

Comments (13) Closed

saudagar Mar 20, 2017 11:31am

tantrums in telecom field , ' jio ' mere laal !

Ahmad Mar 20, 2017 11:30am

JIO Should launch services in Pakistan too.

AhMAd Mar 20, 2017 11:38am

@saudagar Correct, I always found tariffs of companies very weird like you have to recharge separately for every service offered be it, calling, messaging, internet, roaming, etc. then there are days(festivals) when they charge you(3 times of normal day) for messaging even if you have plan activated.

K SHESHU BABU Mar 20, 2017 11:47am

The big fish is swallowing small fish! To counter it's expansion, ' small fish ' are coming together for their survival. The policy of ' jio' is not to let other companies ' jeeney do'! The future may unfold the existence of the Monopoly in Telecom sector

saudagar Mar 20, 2017 11:55am

@K SHESHU BABU thats called survival of the fittest as edward spencer said once ( not darwin as many think )

SID Mar 20, 2017 11:58am

@K SHESHU BABU There is a difference between consolidation & expansion. Only serious player will remain in market . One is JIO , other will be BSNL - MTNL combined, Third Vodafone - Idea , Fourth will be RCOM- TATA- Aircel .It will give them scope for cost cutting, pan india service & utilizing asset ( spectrum) fully.

SID Mar 20, 2017 12:02pm

@Ahmad Get some Chinese company .

saudagar Mar 20, 2017 12:02pm

@AhMAd ,i still remember when CDMA was launched in india , rivals use to call it Charity for Dhirubhai,Mukesh ,and Anil , same are forced to offer paisa per second call rate ! god bless ambanis .

AHA Mar 20, 2017 12:05pm

Customers are winners..............

KT Mar 20, 2017 12:34pm

Jio may come with more attractive offers like free video calls concessions on international calling and special rates on international roaming.

Rather than competing with Jio they should explore other area like from single optical fiber cable connected at home there will be multiple devices connected as Satellite Television, Land line phone , Internet , Radio Services Video Conferencing for Video Calls. Better be trendsetters rater than competitors.

amumiya Mar 20, 2017 12:54pm

@Ahmad its actually backing from reliance to modis ONE india policy , GST follows soon . !

vikas Mar 20, 2017 01:01pm

The combined value of the new entity would be more than Pakistan's total exports and Forex reserves.

RAJA CHILL Mar 20, 2017 06:31pm

"The combined company would become the leading communications provider in India with almost 400 million customers" The customer base of the new entity is double the population of whole of Pakistan.Such a big company ,would be interesting to see where it stands in world raking.