Vodafone Group chief executive officer Vittorio Colao clarified that the planned merger with Idea Cellular would not result in an exit from India for the UK-based telecom major. The top executive, during an call after the third quarter results, said the proposed merger is about “creating a stronger asset, create the No. 1 telco in the country…build the largest network in India and build the best management team through a combination of the two management teams.”
Vodafone and Idea Cellular have officially confirmed their discussions around a potential merger in an all-share transaction earlier this week.
Colao said that Vodafone and Idea merger in India is aimed at creating a “self-funded” Indian joint venture with equal rights to take on the competitive threat, primarily posed by Mukesh Ambani-led Reliance Jio Infocomm.
“The intent of the JV, which will be the largest in India with the widest spectrum coverage and the best management team, is to “self-fund and we are working on discussing mechanics and agreements”, Colao was quoted as saying by media reports.
He however admitted that Indian operations has been dragging the group’s financials, adding that the Group will meet only the lower end of its operating profit guidance range due to “continued uncertainty” in India.
Vodafone currently has around 205 million subscribers in India. The proposed merger with Idea cellular will create India’s leading telco with 390 million users, toppling Bharti Airtel, which currently leads the market with 266 million.
Colao further added that the company anticipates intense competitive pressure in India in the fourth quarter and are taking a series of commercial actions.
The combined entity of Vodafone India and Idea Cellular will have a more balanced subscriber mix, as the current second largest telco is strong in urban areas whereas the Aditya Birla Group telco focuses more on the rural mass market, ratings agency Fitch said in a note on Wednesday. It added that the proposed merger would also help both the telecom operators withstand intense price competition brought by Reliance Jio in the Indian telco market, the agency had said.