Merger talks with Vodafone baseless, responded Idea cellular

Both are struggling with their data revenue market and with Reliance Jio entering in market can push them towards merger, said Abhishek Gupta

India's No 3 mobile phone carrier, Idea Cellular, strongly denied a news report on Tuesday that it was in exploratory talks about a merger with larger rival Vodafone India.

A spokeswoman for Idea's parent, conglomerate Aditya Birla, called the CNBC TV18 report of talks between Idea and Vodafone "baseless and absolutely false".

"This is absolutely untrue and preposterous," she said in an email. "There is no such intent."

Shares in Idea closed 6.9 per cent higher on Tuesday after the TV channel said the two sides were in talks, citing unnamed sources.

A spokesman for Vodafone India, India's No 2 operator by market share and the local arm of Britain's Vodafone Group Plc, declined to comment on the report.

India is the world's second-biggest mobile phone market by subscriptions, behind China, but high competition in the crowded market has kept profits under pressure.

Adding to the competition, Reliance Jio - a telecom venture backed by India's richest man Mukesh Ambani - is set to launch commercial operations in the coming months.

"Both of them are struggling with their data revenue market share and ahead of a big competitive change in the industry they might want to get bigger," IDFC securities analyst Abhishek Gupta said of Idea and Vodafone India.

Any such deal would also face tough regulatory scrutiny and analysts say approvals would be unlikely, as the companies would breach the 50 per cent revenue market share limit in many regions of the country if they did try to merge.

"It's very unlikely," PhillipCapital (India) analyst Naveen Kulkarni said, citing the regulatory hurdles.

"I'm doubtful whether this can go through but there could be some other form of merger, such as spectrum-sharing deals," he added.