What the Idea-Vodafone merger means for telecom, Jio, employees and you: 6 takeaways

NEW DELHI: Merger of Kumar Mangalam Birla-owned Idea Cellular with Vodafone India will not only create a telecom giant but has wide-ranging implications for the industry, services, the staff and consumers. The merger will push more merger moves in the telecom sector. Bharti Airtel has already bought India assets of Telenor and Reliance Communication, Aircel, Tata Teleservices and MTS are in talks for merger.
Below are the seven impacts of the Idea-Vodafone merger and the overall consolidation in the Indian telecom industry:

New pecking order
Vodafone and Idea—No. 2 and No. 3, respectively— will become the No. 1 player in the Indian telecom market, pushing the present No. 1 Bharti Airtel to No. 2.

The combined subscriber count of the merged entity would be nearly 39 crore, substantially higher than Airtel's 27 crore and Jio's present number of 7.2 crore. It would have a revenue market share of nearly 40 per cent compared with Airtel's near-32 per cent. It would have the strongest retail footprint in the industry as well as robust spectrum holdings.

Messier price wars
Aggressive entry of Reliance Jio has launched a big price war. With its free services, Jio has upset the bigger players. The Vodafone-Idea merged entity will only add fuel to the fire. Since the merged entity will have more resources, the telecom price war is going to get messier. Idea-Vodafone merger may lead to more consolidation. Reliance Communications, Tata Teleservices and Aircel are already in talks for merger. Airtel has bought India operations of Telenor. Reliance is surely going to face stiff fight from the new biggies. The consumer will be the king.

Also read: Vodafone, Idea employees' jobs are safe post merger, assure CEOs

Higher prices in long term
Though the consolidated entities would fight the price war for a year or two, prices are going to increase in the long term. With fewer companies in the sector, there is a higher chance of consensus on prices. Moreover, as the new biggies offer better consumer experience, it cannot come at low prices.

Good for industry
Overall consolidation in the debt-ridden telecom industry will lead to better financial health and sustainability of companies. Since consolidation will leave only three big companies in the industry, there will be less competition and bigger revenues.

Layoffs
Vodafone-Idea merger will result in duplication of resources across the country which might require job cuts too. Vodafone CEO Vittorio Colao said the merger will create more opportunities for his India staff but KM Birla, the chairman of the merged entity, hinted at downsizing but not on a large scale.

Also read: Idea approves merger with Vodafone India, to create India's largest telco

Service quality
The Vodafone-Idea merger and the other consolidations in the telecom sector will lead to pooling of vital resources and infrastructure, which will inevitably lead to better service quality and customer experience. A merged entity will also have reduced financial challenges, which will encourage it to spend more on quality of service.