How Ideafone (Idea Cellular - Vodafone) will drastically affect Bharti Airtel: Analysis - chaprama | Insights from the world of Technology and Lifestyle


Saturday, January 28, 2017

How Ideafone (Idea Cellular - Vodafone) will drastically affect Bharti Airtel: Analysis

The talks between Vodafone IN and Idea Cellular are going from quite some time and now according to sources, it is expected that Vodafone IN and Idea Cellular will go ahead with the merger. This biggest ever merger deal will likely take at least two years of time to close.

Vodafone is the second largest telecom operator in India in terms of subscriber base and Idea Cellular is the third largest operator. The resulting company organizes into a #1 telecom operator pushing back Bharti Airtel in terms of subscriber base.

The merger is most necessary for both telecom companies to protect the profitability and reduce the competition pressure. Also, this can be in a better position to undertake future telecom responsibilities and compete with Reliance Jio which has started the war of freebies.

Vodafone planned for an IPO which had to be initiated in 2016. With the entry of tough competitor - Reliance Jio, Vodafone withdrew the plan as it thought the IPO in tougher times especially when profit margins are declining will lose overall valuation of the company and ultimately brings damage to the company. The same situation is being witnessed for Bharti Airtel whose net profit fell 55% for the quarter ending on December 2016.

The merger deal between Vodafone and Idea cellular will ultimately affect Bharti Airtel in many ways.

1) Bharti Airtel will lose the #1 position in telecom industry
2) A merger would create a new carrier with 387 million subscribers, a 36% market share and pan-India 4G spectrum.
3) The deal will also help Vodafone to list from backdoor in India which it is seeking since 2011. This would create a much tougher competition for Bharti Airtel affecting its valuation too.

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