The telecom sector is far from keeping robust health, saddled as it is with mounting debts for which banks have to suffer the consequences. Little wonder then that the State Bank of India has raised a red flag of sorts over the imminent coming together of Vodafone India and Idea Cellular (ICL). ICL is in a bad shape, given the debts it has accumulated. In view of that, a merger with Vodafone would prevent it from sinking into oblivion.
However, it’s using the merger to impress upon SBI to loosen the latter’s purse strings. SBI, with its ever-increasing burden of stressed assets, is wary of extending credit to ICL. It can change its mind, provided ICL furnishes bank guarantees, equivalent to one-time spectrum charges (OTSC) due before the merger. Indian Telecom is going through an upheaval since Reliance Jio entered the market, throwing old calculations out of the window. Its growing market share has prompted its rivals to join forces. Jio’s presence has been a blessing for consumers who are now spoilt for choices.
In cut-throat competition, no entity, however big, can afford to cede ground. Vodafone is now desperate to cement its position as a top service provider and the deal is expected to decrease competition, improve pricing and generate more cash flow. The merger will give birth to the biggest telecom company in the country whose primary aim would be to take on Bharti Airtel and Jio. The battle for market share should translate into rewards for mobile users.
