Voda-Idea deal may bring in positivity to the industry and consumers, believe experts

But telcos could end up losing clients, revenue in the long term, they say

The mega Vodafone-Idea Cellular consolidation is likely to be positive for the telecom industry and consumers in the long run, although the second- and third-largest mobile carriers could end up losing customers and revenue in the short term to Bharti Airtel and newcomer Reliance Jio Infocomm should they get too bogged down with the complexities of the merger process, analysts and industry experts said.

Ex-Bharti Airtel CEO Sanjay Kapoor said the merger is “unlikely to have much impact” on the competitive landscape in the short term, as he expects “Jio to continue attacking” both on network capacity and price fronts.

“Idea and Vodafone could end up losing customers and revenue in the short term, if they take their eyes off the ball due to operational complexities associated with any merger,” he said. Kapoor, in fact, expects Airtel and Jio to make concerted efforts to allure Vodafone and Idea’s customers, and believes the Sunil Mittal-led telco will particularly try “to first protect turf and ensure Jio’s customer gains in short-to-medium term are primarily at the expense” of the two merging entities.

Rajan Mathews, director general of the Cellular Operators Association of India (COAI) agreed that Vodafone and Idea could face customer acquisition and customer retention challenges, going forward, if the merger exercise is not concluded rapidly.

“It’s important that the mega merger is rapidly concluded as any elongation of the process would be detrimental to the merging entities,” said Mathews, who heads the trade body representing India’s top telecom companies — Airtel, Vodafone India, Idea —and the newcomer, Reliance Jio.

Brokerage Motilal Oswal backed the view, saying the Vodafone-Idea merger timelines would be highly sensitive in a hyper-competitive environment. “Since the telecom market is highly competitive, given Jio’s capacity game, there is a major market share dilution risk if the deal takes a prolonged period to fructify,” the brokerage said in a note seen by ET.

Harsh Jagnani, VP-sector head, Icra, sees no immediate letup in competitive intensity and believes the pressure created by Jio’s launch last September, and the subsequent pricing competition, had pushed the Indian telecom industry to consolidation.

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