Vodafone Idea: Big is beautiful?

The merger of Idea Cellular and Vodafone India creates India's leading telecom service provider but in future the focus should be on five pillars - increasing broadband base, reducing debt, improving network quality, providing bouquet of integrated content and preparing Vodafone Idea for 5G

Idea Cellular (being renamed as Vodafone Idea) – An Aditya Birla Group and Vodafone Group partnership becomes operational as India’s leading telecom service provider with a subscriber base of over 408 million.

The new company will accelerate India’s progression towards a digital economy and will offer a wide variety of digital services and solutions – including voice, data, mobile payments, IoT, advanced enterprise offerings and entertainment through digital channels, extensive on-ground presence of 15,000 branded stores and 1.7 million retail touchpoints across the country.

Going forward, Vodafone Idea needs to increase its capex investment in the same range as that of Bharti Airtel and Reliance Jio both for increasing its 4G base as well as for improving its network quality. The investment in the network will also help Vodafone Idea network to be 5G ready by deploying pre-5G Massive MIMO in circles/cities where there is potential of 5G within 5 years say Metro and A Category Circles to start with.

The company needs to reduce its debt from Rs. 1.09 lakh crore which would not be easy for the company but the company needs to do it on a priority basis.

The consumer mobile broadband market is dependent on integrated content so the focus should be on quality as well as quantity of content by building its own content as well as partnering with media & entertainment and content companies both in the start-up space as well as established companies.

Vodafone – Idea Statistics:  

Revenue Market Share (RMS) Leadership in 9 Markets: Kerala, Maharashtra, Gujarat, Haryana, UP (W), Madhya Pradesh, West Bengal, Mumbai, UP (E) and Kolkata

Subscriber Market Share (SMS) Leadership in 12 Markets: Maharashtra, Gujarat, Kerala, West Bengal, Madhya Pradesh, Haryana, UP (W), Mumbai, Punjab, Delhi and Kolkata

Debt and Cash Balance: Rs. 1.09 lakh crore and a cash balance of Rs. 19,300 crore

Broadband Data Subscriber (3G + 4G): 118 mn

Source: DigiAnalysys

Talking about Vodafone-Idea merger, Prashant Singhal, Global Telecoms & Technology, Media and Telecommunications (TMT) Emerging Markets Leader, EY said, “Network quality and integrated content will be primary differentiator for telcos, with current tariffs being low. Telcos will continue to pursue adjacencies for serving a new customer segment or entering into new channels/platforms. We will see emergence of industry mashups between unlikely partners – Technology, Media and Telecommunications (TMT) and other platform players.”

The big differentiating factor for telcos in future will definitely be two fold. For consumers, it will be quality of service, content and new technologies whereas for enterprise it will be bouquet of IoT solutions. If the company can balance the two, then there is no roadblock for the new company.