Mega telecom merger

THE shakeup in the Indian telecom sector that was triggered by the Mukesh Ambani-promoted Reliance Jio is expected to settle down with the formal approval to the merger of two struggling biggies — Vodafone India and Idea Cellular — into the country’s largest mobile phone operator with slightly over one-third share in the world’s second-largest telecom market. Post merger, Vodafone-Idea is expected to have more than 43 crore connections. Bharti Airtel will be consigned to the number two position with about 35 crore connections, followed by Reliance Jio with over 21.5 crore. The sector’s churning through mergers and acquisitions appears complete with three big competitors left in the market. Let us expect fierce, cut-throat competition among these three. Although the token presence of public sector BSNL as the reluctant fourth player will remain, the government-run slacker will be of little consequence in this corporate battle, unless the government undertakes a change in its ownership structure.

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As the free market economy runs on the principle of competition, the triangular battle for expanding market share should trigger a tariff war. It will shower offers to customers, who would not hesitate to use the number portability option to switch loyalties for better rates, quality services and Internet speed. Telecom companies will now have to take each call-drop complaint seriously, not because of regulatory requirements, which are ineffective anyway, but mainly to retain their subscribers. It  is expected that the merger will induce Vodafone-Idea to unveil attractive rates and data offers. The other two giants will be forced to follow suit to counter poaching. The consolidation phase will, therefore, be exciting for the consumer without the malign shadow of a monopolist that Jio was threatening to cast. 

Mergers and acquisitions also have side-effects. The consolidation will have a significant impact on jobs. It will disrupt employment in the sector. Rationalisation of workforce is a natural corollary of mergers. Even the indirect employment through dealers and vendors would contract. It is doubtful if there is a government study on the impact of these mergers on the employment front. The government must look into this aspect and make necessary policy interventions.