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Idea denies Vodafone India merger rumours

Indian number three Idea Cellular has shot down an officially published news story claiming that it was holding discussions with number two Vodafone India regarding a potential merger.

The story was run earlier this week by broadcaster CNBC TV18, and claimed that unnamed sources had confirmed that the two heavyweight operators were considering a merger.

Idea has stated that the story is “baseless and absolutely false”, with spokeswoman Aditya Birla confirming to Reuters that the rumour was “absolutely untrue and preposterous”, adding that “there is no such intent.”

Any tie-up between two of India’s largest operators would have a seismic impact on the market, which is notorious for its fierce competition. In addition to bolstering Idea and Vodafone’s defences against hotly-tipped newcomer Reliance Jio, a merger between the two operators would push the resulting joint entity into first place ahead of current market leader Bharti Airtel.

Based on estimations using GSMA Intelligence results from Q3 2016, Vodafone India’s 201.5 million connections coupled with Idea’s 180.4 million would equal a combined total of 380 million, massively eclipsing Bharti’s 260.2 million.

In a global context, the Idea-Vodafone entity would surpass both the second and third placed Chinese operators, China Unicom and China Telecom, although it would still be dwarfed by China Mobile, which is the world’s largest mobile operator with 928 million connections. China is the only market in the world with more mobile subscribers than India.

However, even without Idea’s firm denial, a deal between the two operators would be unlikely to be approved given the regulatory hurdles it would need to overcome. India limits operators’ regional revenue share to 50%, so an Idea-Vodafone entity would certainly surpass this threshold in many telecom circles.

PhillipCapital analyst Naveen Kulkarni said: “I’m doubtful whether this [reported merger] can go through, but there could be some other form of merger such as spectrum sharing deals.”

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