The proposed merger of Vodafone India and Idea Cellular was triggered by the entry of Reliance Jio Infocomm (RJio), even though there was no guarantee that such a merger will come to fruition, according to a report.
“We think this merger also demonstrates the difficulty that RJio’s entrance has caused for the Indian wireless telecom market. RJio has been giving its voice service away for free, as well as some free data, which has attracted millions of subscribers,” according to a report by Morningstar Equity Research.
“Many of its actions are questionably legal, but Reliance is extremely well connected politically, and so far, the government has been afraid to step in. The firm’s promotions have extended beyond the time allowed by regulation, and it has complained that other operators have intentionally dropped voice call connections; the government has agreed with this,” the note sent out on Monday said.
Over the past two years, the market was beginning to recover from previous price wars, only to now see RJio start them again, it said, adding, RJio’s position as unsustainable in the longer term as it has spent billions building its network and acquiring spectrum and licences.