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Idea Vodafone merger! Collateral damage Payment bank?

RW Update: 15th Feb 2017: We have been proved true. Seems Vodafone is going to surrender its license. More at http://telecom.economictimes.indiatimes.com/news/vodafone-may-surrender-bank-licence/57159202

Original Story As Published on 28th Jan:

The consolidation discussion in Telco industry is heating up. There are multiple serious discussions on potential merger of Idea with Vodafone. Seems the war started by Reliance Jio will have many casualties!

Challenge is that an unintended and disconnected casualty or if we can say, collateral damage, is on the offing. And that is Idea Payment bank!

The whole value proposition of payment bank model for Telcos is centered around the depth and reach of the Telco network. Hence w/o the Idea Telco arm, the payment bank may go into a limbo…left hanging in the mid air! The whole things complicates further because Vodafone has its own payment bank on the way!

There are a few potential scenario for Idea payment bank:

  1.  Continue as is but then not much of a value proposition w/o Telco arm. Very unlikely scenario though the group has been trying to make big in financial services area (got a jolt when their universal banking license was rejected by RBI)
  2. Merge with Vodafone payment bank but in that case they have to surrender their license to RBI. A bit of sunk cost may be there! But is it possible even before they get live?
  3. Drop the idea totally and surrender license. Looks likely but then ABG has to forget bigger foray into financial services and that is a big strategic decission.

Surely this decision would be subservient to overall Telco merger decision but any collateral damage not augur well for the overall RBI niche banking concept as a few players have surrendered their licenses. For reasons, you can refer to our earlier article on payment banks.

Source:

Variuos news reports publicly available on possible merger of Idea Telecom with Vodafone.

ET News: 15th Feb 2017

 

 

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