Vodafone is in talks to merge with Idea and create India’s largest telco

Vodafone has confirmed that it is in discussions over a merger deal that could create India’s largest telecom operator.

In a statement to the London Stock Exchange, the telecom giant said it is in talks with Aditya Birla Group, the group that owns Idea Cellular, over a deal.

“Any merger would be effected through the issue of new shares in Idea to Vodafone and would result in Vodafone deconsolidating Vodafone India,” it added.

Discussions were reported by media in India last week.

Airtel is India’s top operator based on subscribers, with Vodafone and Idea ranked second and third, with around 200 million and 177 million customers, respectively. With Airtel’s subscriber base estimated at 258 million, a merged entity would topple it to take the number one spot.

India’s top telecos have been put under pressure by challenger Reliance Jio and its aggressive 4G strategy. The upstart, which is funded by India’s richest man Mukesh Ambani, introduced a series of low-cost offerings last November that will price data as little as 50 INR ($0.75) per gigabyte and $2.22 per month.

However, all customers can use the service for free until the end of March, a move that prompted a rush in sign-ups. Already, just four months later, Reliance Jio has reached 72 million subscribers with around 600,000 said to be joining each day.

Yes, there is much work for Reliance Jio to do to expand its network across the country, but it is no surprise that the incumbents are already exploring strategies to stave off the threat.