Idea Cellular strongly denies merger talks with Vodafone

Idea Cellular, India's third-largest mobile phone carrier, today strongly denied a news report that it was in exploratory talks for a merger with larger rival Vodafone India.

A spokeswoman for Idea's parent conglomerate the Aditya Birla Group 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."

A spokesman for Vodafone India, the local arm of Britain's Vodafone Group Plc, declined to comment on the report.

According to the CNBC / TV18 report, the two telecom giants were exploring options for a strategic deal and if came through then it would create India's largest telecom company in terms of market share. ''Vodafone has been talking of a $11-billion IPO and Idea Cellular is reported to be valued at around $5 billion. If the two companies do come together then it will create a telecom entity with a market cap of over $16 billion,'' the channel said. It would also mean that Vodafone would then not need to come out with an initial public offering, since Idea Cellular is already listed.

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. Kumar Mangalam Birla, whose group owns Idea Cellular, has in the past said that the next two years will be challenging for the company and the telecom space as a whole.

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. The news of a possible merger between Idea and Vodafone comes at a time when the telecom sector is witnessing a raging war over the entry of Jio.