The combined revenue of Vodafone India and Idea Cellular is not significantly higher than Bharti Airtel’s India revenue based on Q2 fiscal 2017 performance.
Vodafone India and Idea Cellular are considering a merger and both telecom operators have confirmed this to media – saying “talks are on”.
Vodafone India has revealed Rs 22,579 crore as its revenue in the first half of fiscal 2017. Since Vodafone did not share Q2 revenue, we are considering Rs 11,290 crore (half of two quarters) as quarterly revenue for calculation purposes.
Idea Cellular said its standalone revenue in Q2 fiscal 2017 was Rs 9,300 crore.
Airtel India said its revenue in Q2 fiscal 2017 was Rs 19,218 crore. Airtel India generated Rs 14,735 crore from mobile service, Rs 706 crore from fixed broadband, Rs 854 crore from DTH business and Rs 2,981 crore from enterprise business.
The combined revenue of Idea Cellular and Vodafone was Rs 20,590 crore against Rs 19,218 crore clocked by Airtel India – indicating that the difference in revenue was marginal.
However, Airtel India has revenues and fixed broadband and DTH. Both Vodafone and Idea Cellular do not have presence in fixed broadband and DTH. Vodafone has limited presence in wireline telephony business. While Idea Cellular does not have a strong presence in enterprise business, Vodafone has a growing presence in Indian enterprise segment.
The combined entity of Vodafone (204.69 million) and Idea Cellular (190.52 million) has 395.21 million subscribers against Airtel India’s 265.85 million in December 2016, according the Cellular Operators Association of India (COAI).
Benefits and risks from a possible merger
Vodafone and Idea Cellular can enhance its profit and reduce operation costs after the probable merger. Idea Cellular clocked net profit of Rs 4.3 crore on revenues of Rs 9,300 crore in Q2 fiscal 2017.
Vodafone India said its H1 revenue was Rs 22,579 crore against Rs 21,321 crore in H1 FY 2016, registering a growth of 5.9 percent. Vodafone India’s EBITDA was Rs 6,704 crore with EBITDA margin of 29.6 percent — led by higher data revenue and scale benefits.
Idea Cellular and Vodafone could right size employees and reduce a number of buildings and other assets.
The merger will result in the combined entity facing implementation issues, the most significant of them could be the cost associated with liberalizing the spectrum. “The combined entity will also breach spectrum caps in 5 circles, the market value of which comes at Rs 75 billion,” said Bank of America Merrill Lynch.
Investment bank JP Morgan said the merger could unlock more than $9 billion in potential synergies.
Mobile broadband gains
Both Vodafone India and Idea Cellular are not aggressive in 4G network rollouts as compared with Reliance Jio and Bharti Airtel.
Vodafone India has network of nearly 140,000 sites including 75,854 3G / 4G cellular sites. Idea Cellular has 130,633 2G sites, 60,467 3G sites and 24,945 4G sites. Airtel had 158,934 towers including 110,382 mobile broadband sites. Airtel has 148,078 mobile broadband base stations in India.
Idea Cellular’s customers used 107,439 million MB data. Vodafone India said 3G / 4G lead the data growth contributing to around 73 percent of data revenues and data volumes. Airtel users consumed 178,125 million MB on its networks. Airtel had 62.65 million data users contributing Rs 201 per month as data ARPU. Vodafone’s data ARPU was Rs 164 per month.
Bharti Airtel, despite in-significant difference in revenues, will face challenges from a financially stronger Idea-Vodafone unit.
Baburajan K
editor@telecomlead.com
