Vodafone merges with rival to create India's largest phone network

Vodafone's India arm has merged with rival Idea Cellular to form the largest cellular service network in India.

The joint entity will have a subscriber base of nearly 400 million and a revenue market share of 41 percent, according to reports.

India with over a billion mobile connections is presently witnessing a telecom war triggered by Reliance Jio, a low-cost 4G network started by the country's richest man, Mukesh Ambani.

Jio, which claims to be offering the cheapest mobile data in the world, has lured 100 million customers in super-quick time, sending shivers down the spine of its peers.

The Vodafone-Idea merger is a counter to Jio. There are expectations of further consolidation in the $50 billion Indian telecom sector too.

“Such a merger will help Vodafone India improve its position in the mass market, while Idea Cellular would gain from Vodafone’s strength in the metro circles… Finally, the merger would create a new leader in the mobile industry, challenging both Bharti Airtel and Reliance Jio and further intensify the competition,” brokerage firm CLSA wrote in a January report after the merger was announced.

Bharti Airtel, erstwhile market leader, reported a subscriber base of 263 million last October.

The price war triggered by Reliance Jio had prompted British Vodafone to write down the value of its Indian business by 5 billion euros ($5.5 billion), late last year.

This pushed it into the red, with a net loss for the six months until September.

It also led to Vodafone injecting $7.1 billion into its India unit to repay debt, purchase spectrum, expand its network and deploy new technologies. With Jio estimated to capture about 20 percent of the market by 2019, there might be more fund infusions coming up.