IDEA Vodafone merger

Abstract

With the entry of Reliance Jio, the Indian telecom space saw one the biggest disruptions in its history.Given the highly capital-intensive nature of the industry, India’s telecom space had historically been aplayground for a few major players i.e. Airtel, Vodafone, Idea, Reliance Comm, BSNL/MTNL etc.Despite having one of the lowest tariffs in the world, the entry of Reliance Jio forced most operatorsto cut their tariff rates, bringing down their operating profits by as much as 35%. Operators like Ideahad been posting losses for three-quarters straight. In an industry where ‘bigger is better’, a wave ofconsolidation brought together Airtel-Telenor, Reliance-Aircel, and Idea-Vodafone. The latter is set to become the largest telecom provider in the country, overtaking Airtel, once the merger completes.Having received an approval from NCLT, they are now in the final stage of merging the licenses bygetting an approval from DOT. The company is already facing constraints on capex which is impactingthe market share, which has seen a decline of 4 million subscribers between March and October 2017.The merged entity, which will be called Vodafone Idea Ltd will be faced with an uphill task of addingand retaining its subscribers while simultaneously improving its financial health. It was faced with anew One-time spectrum charge (OSTC) of Rs 11,000 crore taking the overall debt of the combinedentity to Rs 1,14,000 crore