The proposed merger of Vodafone and Idea Cellular will create a telco with 35% network capacity share in the country, surpassing Reliance Jio, which would have 31% network capacity share, according to Credit Suisse. It however added that the Mukesh Ambani-led telco would continue to lead in capacity share of data networks “by virtue of its large data spectrum holdings and exclusive 4G deployment.”
In a note, the brokerage said that the Vodafone-Idea merged entity would command a 26% spectrum market share, and it will displace Bharti Airtel to second place. Airtel currently lead with 21% spectrum market share, followed by Reliance Jio with 17% spectrum market share.
The brokerage said that the merged entity’s spectrum footprint will be comparable with Bharti Airtel and Reliance Jio as compared to Vodafone and Idea Cellular’s individual spectrum holdings that lack 3G and 4G capabilities.
The Aditya Birla Group and Vodafone Group recently confirmed their talks to merge Vodafone India and Idea Cellular in an all-share transaction. The move is being seen as a step to counter looming threat from Reliance Jio, which is currently offering free services to its customers in India.
Both the firms have reportedly appointed consultancy firms EY and Deloitte, respectively, to conduct due diligence for the proposed merger. Credit Suisse report also noted that there would be an imbalance in the combined entity's revenue market share (RMS) and network capacity share.
“The merged entity's 35% network capacity share would be significantly behind its 42% RMS…Historically, revenue market shares have had decent correlation with capacity shares, but with the imbalance evident in the above figures, pressure would sustain on incumbents to continue to add capacity at a time when Jio has recently announced expansion plans of its own,“ Credit Suisse sad.
The proposed merger of Vodafone India and Idea Cellular would also create the nation’s largest telecom operator. A new Vodafone-Idea entity would have about 390 million users, exceeding current market leader Bharti Airtel’s 266 million, according to various estimates.