Is the Flipkart-Snapdeal deal the best way to revive the flag-bearers of the Indian e-commerce industry?

Flipkart, India’s largest online retailer, has been on an onset of a flurry of deals, trying to counter the global tech giant Amazon. Post acquisitions of China’s Tencent, eBay India and Microsoft’s exclusive public cloud platform, Azure, in a Rs 9,000-crore ($1.4-billion) deal, Flipkart has set stage for a merger with Snapdeal, that is yet to be finalised in the coming weeks. A potential Flipkart-Snapdeal merger/acquisition is an attempt to help Flipkart reach the No.1 status among Indian e-tailers.

Having had a history of making prolific acquisitions of rivals such as Myntra, Jabong and now eBay, its eye is on another Indian tech company in order to disrupt the traditional market.  The success of this deal  will mark the biggest acquisition in Indian e-commerce and reshape India’s online retail landscape. Flipkart, has roped in Goldman Sachs as an advisor to this proposed deal along with Credit Suisse, which has been mandated by Snapdeal, in order to come up with the final terms and conditions for this transaction.

Why Snapdeal?

A major reason for this proposed deal between these two Indian e-commerce giants, is to attract SoftBank, the largest stakeholder in the online marketplace, which will possibly invest up to $1.5 billion in Flipkart post this deal. It will definitely prove to be a landmark deal for Flipkart leading to transformation of India’s ecommerce landscape.

As stated by Rutvik Doshi, director at the India arm of Inventus Capital Partners, “A Snapdeal acquisition helps consolidate the ecommerce market and get SoftBank as an investor.” Flipkart has made records by making acquisitions and increasing its competitors in the global markets. To begin with, Tencent versus Alibaba, Microsoft against Amazon Web Services and now eBay versus Amazon.

India’s online sellers have been bleeding due to huge marketing expenses and aggressive discounts. Neither Flipkart nor Snapdeal have ever registered profits, even though they were founded almost a decade ago. At present, these e-commerce retail giants,  who are actually the biggest names in the Indian market, face a fund crunch due to huge marketing expenses and aggressive discounts. In  almost a decade, they have done a phenomenal job of bringing a conservative Indian customer to shop online. But, in this process of shaping the online presence of Indians in the e-commerce sector, they have barely been able to make profits and hence, questioned by investors.

A merger between these two might be a win-win situation for both the Indian retailers because it can help cool down the marketing frenzy and contribute to a lot of other factors such as:

  • Market Share – India has become a hub for online retail and offers massive opportunity. As suggested by reports, its current valuation of Rs 1.44 lakh crore is still nascent and is expected to grow over 40% each year.  A report by the Boston Consulting Group and The Indus Entrepreneurs states, that by 2020, with increase in usage of some 550 million Indian cellphone users and high-speed mobile internet, the size of our internet economy (including online retail) will probably double to $250 billion.
  • Funding – The funding crunch has been a major problem for these retail giants. But in the previous year, Flipkart has managed to fetch $1.4 billion in a single round. With the onset of this deal, the cash crunch of Snapdeal could be compensated by the finances of Flipkart.
  • Popularity – With Jabong and Myntra, being part of Flipkart, it has been more popular than Snapdeal among Indian mobile-only customers. A consolidation of these two, might create an Indian e-commerce giant that could give tough competition to the top selling app, Amazon (The Economic Times, 2017). 

The main question that strikes me here is that, What should be the basis of a successful merger : Operational synergies between the two companies or consolidation of investor interests?

It is essential for Flipkart to strike the right deal after its latest round of funding.  Post-merger, the strategic investor SoftBank, will become a significant shareholder in India’s largest e-commerce company by making an investment of up to $1.5 billion.

It is expected that SoftBank will not only  infuse fresh funds into the company, but also buy shares from Flipkart’s largest shareholder, Tiger Global, the New York-based investor.

In order to help revive Snapdeal and its 3,000 employees, this deal is one of the best options for Snapdeal. With an intention to create a strong market position in India and compete with the international e-tailer Amazon, this deal is likely to be a strong proposition for Flipkart as well. Snapdeal enjoys a strong online presence in the north, hence this deal could add a 100 million users to Flipkart’s customer bank. It will also get access to Snapdeal’s small and big warehouses, especially in Northern India. Snapdeal also has exclusive partnerships with global brands which will be an added advantage for Flipkart in diversifying its fashion portfolio. Hence, this merger is likely to strengthen the supply chain of Flipkart and build its financial muscle in India (Businesstoday.in, 2017). 

I believe, a merger between these two is a logical strategy for both the companies to take on the international rival Amazon. I think the focus here should be to consolidate and attract strong investments and maintain a strong presence in the Indian e-commerce sector rather than the short-term goal of making immediate profits.

 

SBI merger: Boon or Bane for India?

State Bank of India, India’s largest lender joined the global league of top 50 banks with the announcement of a merger of the PSU banks of SBI from April 1,2017. The deal comprises of five associate banks,  State Bank of Bikaner & Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala and State Bank of Travancore and the Bharatiya Mahila Bank (BMB) combined into one entity within the next quarter. Post-merger, the bank will function as a unified entity with a deposit base of more than Rs 26 lakh crore and advances of Rs 18.50 lakh crore.

With an intention to expand the provision of services across the country, Arundhati Bhattacharya has been talking about the benefits of this huge merger. She said, “The combined entity will enhance the productivity, mitigate geographical risks, increase operational efficiency and drive synergies across multiple dimensions while ensuring increased levels of customer delight.”

This deal has its pros and cons and will massively impact the banking sector in India. The asset base of the bank is expected to expand to Rs. 37 trillion (Rs. 37 lakh crore) with 22,500 branches and 58,000 ATMs across the country. It will become the largest Indian bank with over 50 crore customers (The Economic Times, 2017).

What is the problem this proposed merger is purporting to solve?

The main intention behind this deal proposition is enhancement of the capital base and the rationalisation of the bank. Post this deal, 1,500 branches will be shut because of duplication and will be rationalised. I think this will definitely lead to better utilisation of resources and substantial cost saving.

Further,  the integration of resources of the associate banks with SBI will help in cost saving and drive synergies across multiple dimensions.

As stated by Arundhati Bhattacharya, the major benefits of the deal will definitely be felt by the borrowers. The parent SBI plans to lower interest rates on home, car and personal loans to thousands of customers migrating from the associate banks and also make other additional provisions for them.

Is this merger mania a well thought out solution to the banks’ problems?

However, this mega-deal brings a lot of unexpected jitters in the structure of the bank, especially for the employees of SBI.

  • The deal is expected to have integration of over 70,000 employees having an immediate negative impact on the pension liability provisions of these employees due to varied employee benefit structures.  
  • The promotion prospects of the employees could be hampered due to overlapping of the branches.
  • Relocation of existing employees due to rationalisation of branches can possibly lead to disturbances for the workforce.
  • The deal does not take into account the effect on the stakeholders of the bank, hence driving fears of staff retrenchments and fewer career progression opportunities for the employees.
  • The unions also fear erosion of their power as an effect of this new merger mania.

But, the main problem with this decision is lack of a well-devised structural plan on behalf of the government. The associate banks have a different footing due to their respective regional flavour and focus.

When it comes to merging public sector undertakings, the Centre does not have a good track record. For example, the merger between Air India and Indian Airlines was not very smooth.

Previously, the government holds a bad record in the merger process of PSUs, Air India and Indian Airlines. The results of this deal haven’t been very fruitful till date. In addition, even internationally, the fate of large global banks has also not been successful during the global financial crisis or emergency situations in the world. But, small banks that focus on niche areas have generally survived the crisis. Therefore, the argument the future of a bank is determined by its size is facile even in a global scenario.

Hence, the question here is that will this deal bring long-term synergy benefits or is just another superficial whim of the government.

 

Intel enters the Driverless Car Market : A merger of “the eyes and the brain”

With technology evolving at a fast pace, driverless cars, that seemed to be only a possibility few years ago, have become a reality today, accompanied by the expectation of a bright future. In my previous post, we talked about digital M&A deals and how they are shaping the world of M&A. Recently, one of the biggest tech acquisitions of 2017 has come into light. Intel announced the biggest deal of the driverless car industry on March 13, 2017. This American chip giant, has confirmed its decision to buy the Israeli driverless tech firm Mobileye for $15.3 billion.

Lately, with the onset of increasing digital acquisitions in the tech industry, a lot of technology companies are trying to outsmart carmakers by developing the brains of these future vehicles. Hence, the market has become increasingly competitive as a lot of new startups are also making attempts to enter the world of auto-tech.

In the sector of autonomous driving, this $63.54 per share cash deal is the biggest purchase till date. The EyeQ software of Mobileye is used by most of the world’s carmakers, helping vehicles with lane driving and emergency brakes, which is a must have for autonomous vehicles. This system, which is currently fitted in over 15m vehicles but is set to be used by many millions more, can also collect information from installed cameras to continuously update the incredibly detailed maps that self-driving cars will require. As quoted by the Intel Chief Executive Brian Krzanich, this acquisition is akin to merging the “eyes of the autonomous car with the intelligent brain that actually drives the car.”

Both these companies are already in terms of collaboration with the German automaker BMW bringing a fleet of 40 self-driving test vehicles in the second half of this year. The acquisition of NXP, the largest automotive chip supplier by Qualcomm in October last year, has definitely had an impact on chipmakers. The Qualcomm-NXP deal has led to this new trend and is attracting a lot of attention by most companies, leading to entry of companies like Intel and NVIDIA in the market of autonomous driving components (ETAuto.com, 2017).

Intel will have to go a long way to come close to Nvidia in the autonomous car market because it goes beyond hardware and delivers a complete solution packed with hardware, software, and sensors to develop a fully autonomous car platform. Previously, we saw that Intel’s (INTC) acquisition of Mobileye (MBLY) could be a long shot when it comes to future growth opportunities in autonomous driving.

There has been a lot of discussion about  this acquisition, especially after the stocks saw a downfall of 2.0% post the merger announcement.  After missing out on the mobile revolution, Intel is now trying to catch up, investing in new areas such as autonomous cars and artificial intelligence.

According to Stacy Rasgon, an analyst at Bernstein, Intel’s revenues of $4.0 billion from M&A’s have been way less than its expenditure of $30.0 billion in the past few years. Their latest move in its catch-up game is the acquisition of Mobileye (MBLY). The success of this acquisition is dependant on the integration of these two companies and the synergies of this deal. With a history of failures in M&As by Intel, the success of this Mobileye merger is already under suspicion by analysts.  Hence, Intel is integrating its Automated Driving Group with Mobileye in order to mitigate the integration risk.

M&A deals in the driverless industry

In the previous year, a number of tech companies, have been active in partnerships, acquisitions, and ventures in the driverless market. Some of the large tech companies have also worked on self-driving programs.

  • General Motors is one of the best examples for being the most active by making more than 15 acquisitions since 2011, with Cruise Automation being the latest one.
  • Ford is a good example with acquisitions of automotive  application maker Livio, machine learning company SAIPS and shuttle transit service Chariot. The company has been making huge investments in private companies working on cloud softwares, LiDAR (Light Detection and Ranging) and mobile car rental technologies.
  • Uber’s acquisition of the self-driving truck maker Otto for $680.0 million is also a recent example of the such M&A deals in the driverless industry.

Growth opportunities drive acquisitions in automotive market

A lot of analysts have been less enthusiastic about this deal and Intel’s diversification move. There has been news about the price of this acquisition being too high and how it will be another failure in Intel’s M&A history. I feel that Intel will benefit a lot from this move, especially after lagging behind in the transition in the mobile sector. Its entry into the driverless industry will be a lucrative deal for this tech giant. Mobileye, with Intel’s resources, will be able to scale up its hardware and software systems. Secondly, as part of this deal, Intel’s automotive team will move to Israel to work under the company’s CEO Ziv Aviram and CTO Amnon Sashua. Intel has a base in Israel with 10,000 employees and hence, understands the culture of the country. Also, only by absorbing Intel’s automotive team, Mobileye can continue to work directly with its many partners. Hence, for Mobileye, it is simple access to greater resources (Reuters, 2017).

Leaving the price aside, I think this deal will be beneficial to both companies with the chances of this merger going high. The collaboration of the camera and mapping expertise of Mobileye with the chip and computing skills of Intel makes absolute sense for Intel to profitably survive in this sector. Hence, Mobileye will definitely provide a value addition to the company, not only as a source of data, but in the revenues and profits as well.

Therefore, Intel and Mobileye, together are set to become very powerful and large in the car-tech industry.

 

M&A In The Digital World

We are no longer an economy of products and services. As technology gains momentum, digitization is transforming the world. Companies are investing in acquisitions to embrace the digital change. Today, let’s talk about the most upcoming trend that has given a new shape to deals in the global M&A market. Digital disruption has become a new way of M&A deals, which is supposed to be quite unique and very different from traditional M&A.

Digital organisations are ruling the world, be it in terms of market cap, innovation or technology. Hence, in order to grow in this age of networks and platforms, every company must become digital. A new transformation has become necessary for leaving age-old business models and adopting new ones, hence leading to a trend for digital acquisitions. In a recent study by EY, M&A was seen as the most efficient way to acquire digital assets, capabilities and technologies to accelerate growth.

Stock market indices like S&P and Moody’s are now dominated by tech titans Apple, Alphabet, Microsoft, and Facebook. 2016 was a year of blockbuster deals in various industries like healthcare, consumer products, chemicals and others. But, not all deal were a part of the trading desks of Wall Street. Some large traditional companies bought small digital ones setting a new trend for traditional-on-digital deals.

2015 witnessed 48% more digital deals than 2011. This increase has been sourced from various sectors such as automotive, natural resource, and consumer goods companies. Also, traditional companies such as  Siemens and General Electric have been the most active digital acquirers of hardware, software, IT service and internet companies. They set records for being the active pursuers in digital M&A.

According to reports by Ocean Tomo, a financial consultancy, 83% of the companies on S&P 500 in 1975, were the ones involving physical or tangible assets. As of early 2015, this number had fallen to a mere 16%. As per the data by Dealogic, digital deals accounted for about 32 percent of all global transactions in 2015 (Bain.com,2017). One of the best examples of this shift is marked by the biggest social media tech giant, FACEBOOK. The value of Facebook’s 1.7 billion monthly active users, is considered to be as valuable an asset as GM’s or GE’s physical assets. Assets (Anon, 2017).

How is new-age digital M&A different from traditional M&A?

  • Digital acquisitions involve a longer list of target companies accompanied by a higher risk of expected returns, unlike a short list of target companies in non-digital deals.
  • The shift from physical capital and services to intellectual and network capital represents the shift from traditional acquisitions to digital ones.
  • The case with digital deals is quite different from traditional deals, that succeed through cost synergies. It is considered better to tread slowly in case of a digital deal.

Some of the mega deals that highlight digital acquisitions happened in the past are mentioned below:

  • French bank Société Générale bought Fiduceo in 2015, hence expanding into the area of financial account aggregation.
  • Axel Springer, publisher of Bild, one of Europe’s largest-circulation newspapers and  a German media conglomerate, has acquired 25 digital properties in order to increase its presence in online classified ads and social media.
  • Relx Group, the information and analytics company has not only bought dozens of information and software companies, but also disposed off its offline properties (http://usblogs.pwc.com/deals/ma-when-the-target-is-digital/).

Challenges of Digital Deal-making

Digital deals have become new enhancement deals for traditional companies. If a company uses similar mechanisms for making digital M&A deals as the conventional ones, it could potentially turn out to be a colossal mistake. Hence, acquirers with less experience in the digital world, face more obstacles in such deals. Therefore, digital M&A poses challenges for companies at every phase.

From the complexity of the identification stage to the tedious valuation stage that involves an appraisal process of the deal, digital deals are a tough call for various traditional companies.

I think the problem arises when traditional companies acquire the digital ones. Interconnecting different technologies as well as being cautious of the walk away price of a deal is important for dealmakers. Deal integration is the most important decision for a traditional-on-digital M&A (Forbes, 2017).

The main crux is that before an offer is made for such a deal, all professionals of the acquiring company, including information technology, human resources and line managers must be an essential part of the deal-integration plan and its implementation.

For successful deals in such a complex structure, companies should opt for the post-deal operating model that works best for them, depending on their identity and the unique circumstances of the acquired asset.

In order to compete in the virtual and non-material world, characterized by virtual reality and augmented reality, it has become  important for organisations to adapt to the digital change. In the present scenario, I feel every company needs to become a digital firm leveraging intangibles, virtual networks and technology platforms.

 

The aborted merger between consumer giants : KRAFT AND UNILEVER

Lately, the M&A market has been experiencing a lot of hustle, and the recent failure of a mega-deal between two consumer giants Kraft and Unilever, stunned the food industry as well as the financial world.

Warren Buffett, the best known American investor and owner of Berkshire Hathaway, proposed a mega-deal in the global food industry. Kraft Heinz, a company run by 3G Capital Partners and Buffet, made a $143 billion bid for the global giant Unilever which is an Anglo-Dutch multinational consumer goods company with headquarters in Rotterdam, Netherlands, and London, United Kingdom.

Post this announcement, a strong prediction about the success of this bid was made by most analysts. It was also assumed that this bid would eventually increase the share prices of both the companies, hence creating a global consumer goods behemoth (The Guardian, 2017)

Shockingly, within 48 hours of this audacious bid, the bid was withdrawn by Kraft. This sudden withdrawal brought a lot of speculation about the two companies. It is assumed that the deal’s economics were apt, but analysts missed on the politics around this merger.  

This tie-up has been one of the biggest news in the market since last week because of the sudden withdrawal of the proposed merger by Buffet.

What was the intention behind Kraft’s bid for Unilever?

Kraft being a packaged food business has been doing poorly on the Dow Jones, DJIA in the previous year, suffering from stagnant sales. Some of the reasons for this underperformance of the packaged food industry are:

  • Slowdown of sales and profits.
  • Change in consumer taste from packaged to fresh foods.
  • Challenges posed by new entrants in the food industry.
  • Dividend-hungry investors came up with pricey stocks.

As stated by Mark Astrachan, an analyst with Stifel, “Food doesn’t grow as a fast as [home and personal care].” It was predicted that this tie-up would bring together the fifth and third-largest consumer food firms (The Economic Times, 2017).

Hence, I feel, in order to revive the company and its profits, Kraft needs a deal that would help in cutting costs.  A merger with Unilever, which is both a food and personal care company, Kraft Heinz, could have benefitted from this mega-deal, creating mega FMCG player in the market.

What are the potential reasons behind failure of this mega-deal?

According to Thomson Reuters, the success of this deal could have made history, being the third-biggest takeover till date with $82 billion sales in the combined entity. But, analysts say that there are several reasons for the public withdrawal of this offer, which have created a buzz in the M&A market. Some of these assumptions have been around the regulatory requirements and takeover rules in U.K. Some other key concerns responsible for this withdrawal have been the differences in the cultures and business models of the two companies.  

One of the major controversies around this news has brought in light the statements by the British Prime Minister Theresa May. May has previously criticised  Kraft’s acquisition of Cadbury Plc, another British household name. She has recently voiced her opinions about the government playing a prominent role in proposed foreign acquisitions of UK companies.

In my opinion, the success of this deal could have increased the job loss in UK, which encouraged the UK government to attempt to block this deal. Also, this deal would have been against Trump’s policy of investing money in the States, making the success of this deal a possible reason for sour relations between the two nations (Fortune.com, 2017).

I feel, the most important outcome of this dubious deal between these two consumer giants has been the plunging share prices of Unilever after this sudden withdrawal. Unilever saw the worst day in more than a decade after Kraft Heinz’s walkout from the takeover bid.

Kraft Heinz, backed by Berkshire Hathaway, run by Warren Buffett has a good financial capacity for a large acquisition and can easily make successful deals with large brand conglomerates. Unilever, on the other hand, is facing pressure to speed up shareholders’ returns, following this bid from Kraft Heinz, which has put Unilever group’s structure and profitability under public scrutiny. Therefore, Unilever group has decided to conduct a root-and-branch review of its business just few days after an aborted deal from Kraft Heinz.

The failure of such a strong proposition was surely unprecedented becoming the third largest deal in the M&A market, that has collapsed (Vccircle.com, 2017).

 

Snapchat IPO – Wall Street ready for Tech’s biggest IPO

Snapchat is all set to begin its roadshow to pitch the stock to potential investors, becoming the largest U.S.-listed tech offering since Alibaba Group Holding Ltd.’s (BABA) IPO in 2014.

The parent company Snapchat has announced its intention of raising $3 billion in its IPO. Listed as a camera company in the New York Stock Exchange, SNAP will be a Class A common stock with a valuation between $19.5 billion and $22.2 billion. A remarkable increase in the revenues of the company, from $58.7 million in 2015  to $404.5 million in  2016, changed the financial landscape of the company. The difference between 2015’s fourth quarter revenue of $32.7 million and 2016’s fourth-quarter revenue of $165.7 million is commendable, with a sheer majority of its revenue from North America, followed by $14.7 million from Europe and $5.7 million from the rest of the world. The major source of this upsurge in revenues has been advertising. The number of the application’s daily active users rose from 110 million in December 2015 to 161 million in December 2016 (Ciaccia, 2017).

The recent launch of wearable glasses, Spectacles as an extension of the company has also been an important reason for its revenue growth. This new addition of this hardware product is likely to bring additional competition for the company.

However, Snapchat is not all about increasing revenues, its losses have also been on an increasing trend. During the year 2016,the company incurred a loss of $515 million which is much more than the loss of $372.9 million in the previous year. One of the major causes of this increasing loss is the increase in operating losses. Negative cash flows from operations and operating losses are expected to be a part of an ever-changing and dynamic company. Hence, unforeseen expenses, operating delays and other unknown factors are expected to bring these losses even in future periods,making profitability a big challenge (Investopedia, 2017).

Its IPO filing is also expected to bring additional legal and accounting expenses. Therefore, increase in revenues, especially at a greater rate than the increase in expenses is very crucial for the company at present. Snapchat has been one of the most innovative companies, hence being the strongest contender for the title, Company of the Year by Inc. Magazine. in 2016.

CEO Evan Spiegel has proved that he believes in making things new and has showed a penchant for innovation. Partnerships with dozens of publishers on the Discover platform has been key to expanding its audience. This year, the company capitalized on its Discover feature, that kicked off in 2015. In addition, deals and tie-ups with major publishers, including NBC and The Wall Street Journal, as well as sports leagues like the NFL, where these publishers own and publish content on their own snapchat channels, proved to be one of the most successful features and an essential source of increasing revenues for the company. 

One of the chief concerns for Snap is engagement with maximum users between age groups of 18-34 years. The launch of Instagram Stories feature has been attracting some engagement away from Snapchat. Hence, Snap’s S-1 specifically called out Instagram as competition for the company. It faces competition from various other applications, but in the year 2016, it surpassed rivals as big as Twitter and Pinterest, hence, turning out to be the fastest-growing social media company in the U.S.

In my opinion, in a very short five year history of Snapchat, it has made good decisions that have worked in the best interest of the company. One of them being, turning down a $4 billion acquisition offer from Facebook in 2014. In 2017, with its IPO expected to be in the $19.5 – $22.2 Billion range, the company is already worth five times Facebook’s offering price turning out to be the one of the biggest U.S.-listed tech IPOs in history.

Proposed merger = Vodafone + Idea

January 30, 2017 brought the big news for the Indian Telecom industry when British Telecom giant Vodafone Plc confirmed a merger between Vodafone  India and Idea Cellular.

This merger between Vodafone and Idea is expected to have a huge impact on the Indian telecom Industry with Vodafone + Idea capturing 43 percent of the market share beating the market leader, Bharti Airtel which currently holds 33% of market share. The upsurge of 29 percent in intra-day trade in the share capital of Idea Cellular is a  fair representation of this  all-stock merger.

I think it is a great development for our economy because it will improve the financial health of the telecom industry and India’s position in the mass-market. This consolidation will be a solution for many persistent problems in the telecommunication sector. Some of the highlights are:

  • Vodafone and Idea together will be able to have the highest spectrum in this industry, enabling the provision of highest 4G spectrum in the 1800MHz band. This will be a great boom for the data market of India.
  • This will also make Vodafone-Idea, Airtel and Reliance Jio the biggest telecom players in the Indian telecom industry with sufficient market share for each of these players, thus promoting significant investments in the sector.
  • With Idea listed on the Indian stock market, this deal would automatically give Vodafone a listing on the Indian stock exchanges.

Therefore, Vodafone and Idea together will be able to offer cheap high-value products. Hence, this merged entity will have the best-in-class coverage and capacity spectrum. The consolidation will leave enough market share for each player to make significant investments in the Indian entity. As mentioned in a report by JM Financial, the success of this deal will create a three player mobile market which may be more sustainable and profitable in the long-term (Chatterjee, 2017).

Indian telecom market is one of the toughest and most competitive markets in the world. Also, with demonetisation and the attempt to make India a digital economy means a lot for the telecom players. The ‘cashless’ economy will promote mobile governance and hence, make way for a digital payments ecosystem. Hence, companies capturing the market at this time will have a distinct competitive edge.

On the contrary, I think the entry of Reliance Jio has caused pressure on the telecom market leaders such as Airtel, Vodafone and Idea. Reliance Jio’s free distribution of SIM cards has actually been a catalyst for this consolidation, giving this deal the required push. With Reliance Jio and its investment of Rs 150,000 crore in wireless services in India, Reliance captured about 19 percent of the market share with 72 million subscribers in the telecom industry. I believe this merger between Vodafone and Idea will add fuel to fire and increase the spectre of price war in the telecom space. Hence, this deal is likely to start a new competition and mark the beginning of a bitter battle amongst the biggest names in the industry (http://www.hindustantimes.com/, 2017).

The combination of two significant players wanting to join forces, and yet not having the money to pay for it is seen as an inflection point in the Indian telecom sector which will have a huge impact in this competitive landscape (Firstpost, 2017).

Do you think the Vodafone and Idea merger is a panacea for Indian telecom sector?