British telecommunications company Vodafone confirmed that it is in talks for a possible merger with India’s Idea Cellular- a tie-up which will lead to the country’s largest telecom company with a combined revenue of Rs. 80,000 crores.

If the deal goes through, it would result in an agglomerate that would be a major player in the telecom industry and would pose a serious threat to established as well as upcoming companies, such as Bharti Airtel and Reliance Jio respectively.

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Seemingly, the merger intends to cash in on Vodafone’s huge clientele in the metropolitan areas of the country with the addition of Idea’s rural stronghold.

Vodafone

The combined company is set have a market revenue share of 43% of the total subscribers in the country along with an estimated 40% of active subscriber share in the market.

Also, it will be accountable for at least 25% of the allowed spectrum and will, in order to be compliant with the spectrum rules and regulations, have to sell 1% of the same. Along with that, it will also require clearance from Competition Commission of India.

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There are, however, several hurdles that both the companies need to overcome if they are to make this merger a successful endeavor.

According to M&A regulations, spectrum holding of the merged entity should not be more than 25% across all bands and more than 50% in each band individually.

idea

Further, the market share revenue of the company once the merger is done, should not be greater than 50% in any circle.

Looks like both the companies have their work cut out as a breach in spectrum regulations has already been seen in as many as five circles in the 900MHz.

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Additionally, if the merger does take place, the revenue market share of the resultant company is estimated to overshoot the 50% margin in at least six cities.

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