After merger, Idea-Vodafone to up the ante in mobile broadband space

With around 88 million 3G or 4G subscribers under its belt at the end of the December 2017 quarter, the Idea-Vodafone combine is no walkover in the mobile broadband sweepstakes.

It is already the second-largest mobile broadband player in terms of subscribers, bigger than its key rival Bharti Airtel, which had 62.1 million subscribers in the same period. However, the new entity would have a lot of catching up to do with Reliance Jio, which had 160 million 4G customers in December-end.

The combine saw its 3G/4G customers grow around 15.4% between the quarter ended December 2017 over the previous quarter. Bharti’s mobile broadband data customers grew 12.6% in the same period, and Jio’s by 15.5%.

But, it’s not all about data. The combine, which is expected to complete its merger by the first half of this year, also has over 300 million 2G subscribers who competitors are aggressively trying to nibble away. Jio recently dropped tariffs once again, and Airtel CEO Gopal Vittal said it would grab market share from the Idea-Vodafone combine.

The combine saw its subscriber market share fall from 36.15% in September last to 34.84% in November. Vittorio Colao, CEO of Vodafone Plc, has justified the reduction, citing the need of the merged entity to have subscriber or revenue market share in any given circle under 50% under competition rules.

But, in November last year, the combine took advantage of the closure of operations by RCom, which primarily had 2G customers. According to  the Telecom Regulatory Authority of India (TRAI) data, the combine made net subscriber additions of over 5.8 million, close to Jio’s 6.1 million customers, while  Bharti added 4.3 million customers.

According to CLSA, the combine has strong data spectrum in nine circles forming over 55% of its revenues. If Idea-Vodafone’s market share in the remaining circles even halves, it will loose only 10% revenue share. Based on their long-term assessment, the merged entity’s revenue market share will fall from 42% in FY17 to around 35% in FY18 and be neck and neck with Jio in FY20 with 32% each (Bharti will be at 30%).      

Idea-Vodafone is pushing its coverage of 4G across the country. Those involved in the merger point out that after the announcement of the merger, the two have added over 70,000 unique towers, primarily in 3G/4G, across the country. As a result, they say, the merged entity has over 450,000 towers, out of which more than half are 4G-enabled.

Executives say it would also not require any major rationalisation of its combined 21,000 employees. “We expect an attrition of 15%, as we are not replacing those posts with new employees as the process of merger will take more than a year. So, the restructuring of employees would be limited as we will need them for a much larger network,” said an executive.  

Idea has announced that it would be infusing Rs 67.5 billion of equity to meet capital expenditure. The two telcos will also receive over Rs 78.5 billion by the selling of their captive towers to American Tower Corporation. The two, according to estimates, would be putting in Euro 1.8 billion. And they have more cash in their arsenal -- with a  combined stake of 53% in Indus Towers, they can rustle up over Rs 400 billion through monetisation.