If you are looking for expert comment on Vodafone India’s merger with Idea Cellular John Colley, of Warwick Business School, is a Professor or Practice and researches M&A. He is also a former MD of a FTSE 100 company.
John Colley said: “The merger will have 400 million users and around 35% of the market. It will also have the lowest cost per user in a very competitive market with around 10 players.
“This is likely to stimulate a spate of mergers between the other competitors in an attempt to reduce their costs. Vodaphone/Idea, with their cost base, will be able to undercut all the other competitors.
“The logic behind telecoms mergers is indisputable. In effect mobile telecoms is infrastructure and the winner in such a market is the business with the greatest market share. They can put the biggest volume of users through their infrastructure, which is effectively fixed cost, minimising cost per user.
“Savings come not just from having one pipeline but also through rationalising shops, regional management, head offices, systems and advertising. Expect substantial savings and job losses. However, such mergers can be difficult to negotiate and implement.
“In the UK, Orange and T Mobile very effectively merged to create EE, which was then sold to BT for £12Bn, far more than was originally envisaged. “However, with a projected 35% of market, the competition authorities are bound to be interested.”
