Tata Teleservices and Reliance Communications' share saw a hike of at least 10 per cent on Monday amidst news of the merger talks between the two. According to media reports, Reliance Group Chairman Anil Ambani has met the newly appointed Tata Sons Chairman N Chandrasekaran to talk about the possible merger of Reliance Communications with the Tata Group.
Last month, Britain's Vodafone Group also confirmed that it is in discussions with the Aditya Birla Group about a possible merger of its India unit with Idea Cellular, which would create India's largest telecom company.
Bharti Airtel and Idea Cellular stocks rose 1.66 percent and 2.55 percent, respectively. While Reliance Communications rose 4.37 per cent, the Tata Teleservices (Maharashtra) stock rose 6.62 percent on the BSE.
These big mergers could reshape the entire telecom sector scenario. Here's all you need to know about the massive union:
- If Tata Tele, Reliance Communications deal happens, it will create the third largest entity in the industry with around 260 million subscribers. "Nothing has been finalised yet," the Economic Times quoted sources as saying that the issue regarding NTT Docomo's exit from Tata Tele needs to be resolved. The source also added that there are a few hurdles such as Tata Tele's debt of about Rs 30,000 crore.
- Reliance Communications is already on the verge of finalising the agreement to merge Aircel Ltd into its own business. It will also soon be merged with Systema Shyam Teleservices, the owner of MTS services.
- Meanwhile, Idea Cellular and Vodafone India are reportedly looking to seal their proposed merger within a month. The merged entity of Vodafone-Idea has potential to emerge as the market leader in terms of wireless subscribers. Vodafone and Idea are in the second and third spot currently, while Bharti Airtel is number one.
- Top five service providers have over 80 per cent of the market share of the total broadband subscribers. Vodafone-Idea entity would become the leader in the category, overtaking Bharti and Reliance Jio.
- However, the biggest hurdle to the merger will come in form of regulatory approvals and practical implementation challenges, warn industry experts who, among other issues, cite breach of revenue marketshare and spectrum caps in five of the 22 telecom circles.
- Since its entry in India in 2007, Vodafone has become number two operator in the country, but its journey has been tumultuous as it is locked in a legal battle with the government over a USD 2 billion retrospective tax claim over its acquisition of Vodafone India from Hutchison in 2007.
- Both the mergers, if it they happen, will further intensify the tariff war, say industry experts. Backed by Mukesh Ambani, Reliance Jio Infocomm is offering free voice calls and data till March and has notched up 74 million users. It has already invested over USD 25 billion and is investing another Rs 30,000 crore (USD 4.8 billion).