Telecom wars: How Bharti Airtel can benefit from Vodafone-Idea merger

Bharti may look at gaining market share pre-merger and benefit from a lower capex intensity

Merger of Vodafone and Idea Cellular robs Bharti Airtel of its top position in the sector but the scale may tip in Bharti's favour as the leading mobile operator would benefit by focusing on operations and strengthening technology to retain its clientele at a time when the two rivals would be busy finalizing the contours of the deal.

With the announcement of the Idea-Vodafone merger deal there would be fierce competition in the sector and only three giants would emerge. Bharti Airtel has seen many such things in the past and is well established to deal with challenges, an independent telecom expert said.

UBS Securities Research in its report said, "We continue to prefer Bharti (Airetl) as not only should the company benefit from a potentially improved competitive environment, but also examples from other markets suggest the non-involved parties tend to benefit more from industry rationalisation."

Bharti and 4G entrants may look at gaining market share pre-merger and benefit from a lower capex intensity. In the medium term, leverage balance sheet of the combined Vodafone and Idea may limit its ability to participate in data growth, HSBC Global Research.

As the market settles on three (rather than four) sustainable operators, pricing will likely be more disciplined, with a positive impact on ARPU (average revenue per user) and margins. The spectrum costs could also come down as the number of serious bidders shrinks to three.

According to a government official, both Idea Cellular and Vodafone will have to shed their excess spectrum in some circles which could either be shared or traded as per government approved guidelines, Bharti Airtel can take advantage of it.

Both the companies have to surrender excess spectrum in the 900 MHz and 2500 MHz bands across Gujarat, Maharashtra, Haryana, Kerala and Uttar Pradesh (West) circles so that the combined entity does not breach the spectrum holding cap fixed by the Telecom Regulatory Authority of India (TRAI).

Another major beneficiary of consolidation in the sector is the consumer as the experts feel that the three top players (Bharti Airtel, Idea-Vodafone and Reliance Jio) would bring in best technology to retain customers as the differentiator would be quality of coverage.