Though Idea denies media reports of a possible consolidation with Vodafone, it appears rational for both and raises hopes of pricing power in the sector. From Idea?s standpoint, this could be a much-needed shield against threats from Reliance Jio?s full-scale launch and highly competitive auction bidding.
For Vodafone, it would mean a backdoor listing, which would otherwise be difficult given ~$2bn IPO (implied market cap of ~$8bn, 1.5x of Idea), allowing for opportunistic equity capital raising. Surmountable regulatory hurdles comprise spectrum ownership limits and anti-competitive market position in Gujarat, Haryana, Kerala and Maharashtra. The two have a complimentary footprint, with Vodafone being dominant in the metros and TN, while Idea dominates AP, MP and UP(W).
In such a scenario, pricing power will remain elusive given three behemoths (Airtel, Jio and ?Idea-Voda?) with deep pockets
