India’s Vodafone Idea is facing potential collapse amid rising competition and huge back-dated fees, and majority owner Vodafone Group has indicated it will not offer further bail-out. Even VI’s main rivals, Bharti Airtel and Reliance Jio, have said it would be bad for the Indian market to have only two strong mobile operators, should their competitor exit or fail. One option to save VI is reported to be a merger with state-owned BSNL, but since it is also under huge financial and operational pressure, this could be a case of tying two bricks together and hoping they float.
Kumar Mangalam Birla, chairman of Aditya Birla Group, which owns 27% of VI, has offered to give up its stake to ensure that the telco continues to operate. That could be acquired by BSNL, which provides mobile services in all India’s telecom circles (service areas) except the crucial markets of Delhi and Mumbai, where MTNL is the state-owned player. Another proposed merger, between BSNL and MTNL, was put on hold two years ago.
There are some synergies – BSNL has an extensive rural network and is often the only service provider, though it has yet to launch 4G, while VI is mainly urban, and has an advanced 4G network in metro areas, as well as 5G plans. BSNL also has more extensive wireline access networks than VI, though both have invested in fiber extensively in recent years.
However, the contrast in cultures, organizations and target subscribers (BSNL has a far lower-ARPU base), as well as the different financial burdens afflicting both operators, could make this a very tough merger to turn into commercial success in the near term, and in a challenging market like India.