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A Mega-merger and a Bureaucrat’s Transfer
The formation of India’s largest telecommunications group with Idea Cellular and Vodafone coming together indicates that Reliance Jio’s competitors are feeling the heat. The business rivals of Reliance Jio believe that the company influences policies and appointments. The Idea–Vodafone merger may lead to cartelisation which will not benefit consumers in the medium term.
The assistance of Advait Rao Palepu, editorial assistant at the EPW and an anonymous industry source is acknowledged.
Is there a connection between the impending formation of the country’s biggest telecommunications conglomerate and the sudden transfer of a top government official who was heading the Department of Telecommunications (DoT) in the Ministry of Communications and Information Technology? The link between the two developments may not seem obvious. They are, however, closely connected and have much to do with the consolidation that is taking place in the world’s second-largest market for mobile communication services. What used to be an intensely competitive market in India, with over half a dozen players vying with one another, is soon going to be dominated by three powerful business groups. Two of these, the Bharti Airtel Group (which may lose its position as market leader) and the Idea–Vodafone combine have predictably been unhappy about how the “free” services offered by their rival, Reliance Jio (RJio)—which is part of the Reliance Industries Group headed by India’s richest man Mukesh Ambani—have badly dented their bottom lines. But that is not all. The incumbent companies are wary of the clout that continues to be wielded by the Reliance Group in the corridors of power in influencing polices and appointments.
On 20 March 2017, it was announced that Idea Cellular, a part of the Aditya Birla Group, and Vodafone, the London-based multinational telecom group, would be coming together ostensibly to share capital infrastructure and synergise their services. But few were convinced about the stated reason for the two merging. Vodafone and Idea were in the second and third positions respectively in India’s telecom industry with a combined market share of roughly 40% in terms of revenue, and with a total subscriber base of around 20 crore. The two, together with Bharti Airtel, which has a share of around a third of the total subscriber base, were reacting to the intense competition generated by RJio after it launched its “free” internet-based mobile data and communication services in September 2016.
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