Business Today

Airtel keen to reclaim tag of country's largest telco from Vodafone Idea

The Sunil Mittal-controlled company might snatch back its No. 1 ranking on RMS in the next two-three quarters since VIL is expected to lose ground in the course of its integration process as it conforms to M&A rules.

twitter-logo BusinessToday.In   New Delhi     Last Updated: September 7, 2018  | 19:33 IST
Airtel keen to reclaim tag of country's largest telco from Vodafone Idea

Earlier this week, Bharti Airtel's India CEO Gopal Vittal had reportedly urged employees to focus on gaining revenue market share (RMS) in the next two years. After all, the company had recently lost its position as the country's largest mobile phone company in terms of subscribers and RMS to Vodafone Idea Ltd (VIL) - the new entity created by the Rs 1.6 lakh crore merger of the two telcos - while Reliance Jio continues to grow in strength.

But, as it turns out, Airtel should be hopeful to win back the title of the country's largest telco. According to The Economic Times, the Sunil Mittal-controlled company might snatch back its No. 1 ranking on RMS in the next two-three quarters since VIL is expected to lose ground in the course of its integration process as it conforms to M&A rules.

On the other hand, Airtel is looking at gains, especially after it concludes the business integration with Tata Teleservices' consumer mobility business, which it acquired last year. The company is currently awaiting National Company Law Tribunal's (NCLT) green signal for the deal, following which it will seek DoT clearance.

Rohan Dhamija, partner and head of India & Middle East, Analysys Mason, told the daily that "empirical evidence" suggests that when two telcos merge in a stable market, the "combined entity loses about 200 basis points of RMS" during post-closure, network integration. However, in VIL's case, the loss "could be bigger".

He attributed this to India's brutally competitive telecom market, where Airtel and Jio are spending "much more on 4G capex and [are] likely to focus on smartphone user additions over the next six months during which VIL will be busy with networks integration".

Just conforming to existing subscriber and revenue market cap rules will cost VIL some ground. Under telecom M&A rules, a merged entity's combined RMS and customer market share cannot exceed 50% in any circle. VIL currently exceeds the prescribed cap in four circles, Gujarat, Haryana, Kerala and Maharashtra. It will have to comply with the rule in a year, post-closure of its merger deal.

In any case, the lead that VIL currently enjoys over Airtel is a slim one. As per regulator's data, Vodafone Idea combine's RMS has dropped from 40.7% in March 2017, when the merger was announced, to nearly 33%, while Airtel's RMS stands at nearly 31%. Reliance Jio comes in at third position with just over 22%. According to investment bank JM Financial, VIL faces a "tough situation" as it is losing revenue, whereas "Bharti is seeing stability while Jio continues to march ahead".

Far from getting to enjoy its current status as the top cat, VIL may even end up getting marginalised by the aggressive Jio, especially if Mukesh Ambani's game plan envisions a duopoly. Citing SBI Cap Securities, the daily added that the newly-created entity faces unrelenting pricing pressure from Jio, especially as the telco "strives towards its stated 50% RMS goal by FY21". 

Youtube
  • Print

  • COMMENT
BT-Story-Page-B.gif
A    A   A
close