Get enrolled in IAS 5 year programme (After X) or 3 year programme (After XII) or 1 year programme.
CHANDRAA ACADEMY has introduced the most innovative and 100% result-oriented IAS programme.

Vodafone-Idea merger unlikely to curtail competition in telecom sector, say analysts

New Delhi: The Idea-Vodafone merger will create a strong player, but multiple challenges from the deal, including breach of spectrum holding and revenue market share cap, will have to be resolved in a fixed time frame, ICRA said on Monday.Analysts are of the view that the competition in the industry is unlikely to subside in the medium-term despite the mega merger. "s;The transaction faces many challenges... The merged telco would breach the spectrum holding cap in five circles in 900 MHz band and in two circles in the 2,500 MHz band and is likely to breach the revenue market share cap of 50 per cent in six circles. These would have to be resolved in a fixed time frame,"s; said Harsh Jagnani, VP-Sector Head, ICRA. Further, the debt levels of the merged telecom firm will be high at around Rs 1,08,000 crore, he said, adding that the entities will have to inorganically deleverage to rein in the debt.In the long-term, this consolidation is expected to be positive for the industry as it will restore some pricing power and give better bargaining terms with vendors, he hoped. "s;We do not expect any reduction in the competition in the industry in the medium term as the large telcos would continue to keep the intensity high,"s; he said.Pressure created by Jio's launch and the subsequent pricing competition pushed the Indian telecom industry to consolidation, he noted. "s;While there are many regulatory hurdles for the merger, it would nevertheless create a strong player in the industry,"s; he said.Vodafone-Idea will be India's largest telecom operator in terms of subscriber base, revenue and spectrum holding. It will have a strong footprint, with market leadership in 12 out of the 22 circles, and second rank in nine circles. The merged entity will also benefit from operational synergies allowing it to curtail expenses such as co-location rentals and energy costs, customer acquisitions and support teams and reduced expenses on branding. "s;This should translate into profitability uplift to the merged entity although the same will take some time to materialise,"s; he said.According to Angel broking, as the industry consolidates with 3-4 large players, there can be some sanctity that can return to pricing and end of data wars, but the same seems unlikely over the next 1 year. "s;The consolidation in the telecom industry through the Idea-Vodafone merger, acquisition of spectrum from other operators by Bharti Airtel and market share gains by Jio would ensure competitive and demanding times for telecom operators, but the consumer is having the last laugh at their expense at the current juncture,"s; said Mayuresh Joshi, Fund Manager at Angel Broking.According to Credit Suisse, the Vodafone-Idea combine will remain "s;highly leveraged and need some form of capital infusion sooner than later"s;. Motilal Oswal Securities Head - Research, Gautam Duggad said there is a major market share dilution risk if the deal takes a prolonged period to fructify, given the hyper-competitive market. "s;Our channel checks with regulatory and telecom M&A verticals indicate that the spectrum and revenue caps may not be a major obstacle"s;, he said.Centrum Broking said that in the current scenario, while the merger of Vodafone-Idea makes them a dominant player, the competition could still be high in the data business.Vodafone India and Idea Cellular today agreed to merge their operations to create the country's largest mobile phone operator worth more than USD 23 billion and commanding 35 percent market share. The merged entity of Vodafone and Idea Cellular, which are India's number 2 and 3 mobile operators, respectively, will overtake Bharti Airtel in a bid to tackle a raging price war in the world's second-largest mobile market.The British firm will own 45.1 percent of the merged entity while the Aditya Birla group, Idea's parent company, will own 26 percent after paying Rs 3,874 crore cash for a 4.9 percent stake.