Vodafone's Indian unit and Idea Cellular announce merger

Vodafone India store Image copyright Getty Images

UK telecoms giant Vodafone has merged its Indian business with Idea Cellular, India's third-largest network, to create the country's largest operator.

The combined company will have almost 400 million customers, accounting for 35% of the market share, the firms said in a statement.

The announcement ends months of speculation over an impending deal.

Analysts say the merger was to fend off competition from a new operator - Reliance Jio.

Telecom giant sparks India price war

Vodafone's Indian unit in merger talks

Owned by the country's richest man, Mukesh Ambani, Jio has forced Vodafone India and Idea Cellular, together with current market leader Bharti Airtel, to cut prices.

Shares in Idea rose almost 4% in Mumbai following the announcement of the deal.

India's leading mobile networks are embroiled in what analysts have described as "a vicious price war", started by the arrival of Jio.

More than 10 telecom operators are battling it out to try to attract India's one billion mobile phone users.

That has forced firms to keep tariffs low, significantly affecting their profitability.

Analysis: Sameer Hashmi, BBC News, Mumbai

It was interesting that both companies decided to hold an off-camera press conference to announce such a big merger.

But midway through the conference, it became clear that there were still many operational issues which needed to be ironed out.

How will they brand the new entity? Who will be the new CEO? These questions were not answered at the press conference.

It will take 18-20 months for the whole merger process to complete. Some job cuts are also expected as both the firms align operations to trim costs.

But the merger should ring in good news for customers because the new entity is expected to slash prices to compete with Reliance Jio.

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