About $600 million is estimated to be saved as opex in fiscal year ending March 2019, while another $300 million will be saved in fiscal year ending March 2020
Vodafone-Idea combined entity could save $900 million in operational expenditure in the next two fiscal years but it will take over a year to close the 4G network gap with Bharti Airtel and Reliance Jio, according to analysts.
"Vodafone-Idea's 4G network is likely to continue to trail Reliance Jio and Bharti Airtel given the gap on 4G capex. Reliance Jio doubled its 4G capex in fourth quarter of FY18 and its capex/sales is expected to remain high for some time. Full network integration (of Vodafone and Idea after the merger) may narrow this gap, but this could be 12-15 months," analysts at HSBC Global Research said in a note.
About $600 million is estimated to be saved as opex in fiscal year ending March 2019, while another $300 million will be saved in the fiscal year ending March 2020. Capital expenditure requirements and integration costs for the next four to five quarters may be covered by recent cash injections, HSBC said.
The final approval to the biggest merger - between Vodafone India and Idea Cellular - in the industry is expected to happen soon, which will create the largest telecom player in India surpassing Bharti Airtel. The final approval has to come from the department of telecommunications.
It is learnt that DoT may raise a demand of Rs 2,100 crore as one-time spectrum charge from Vodafone-Idea Cellular for which bank guarantees may have to be submitted by the combined entity. By doing so, DoT will not take the recent Airtel-Telenor legal intervention as a benchmark to clear the Vodafone-Idea merger. Sources said the demand notice is likely to be sent next week.
A senior official from Cellular Operators Association of India says that though DoT could take the example of Airtel-Telenor deal, in which SC had asked DoT to clear the deal without taking bank guarantee for one-time spectrum charges. But, there are apprehensions among bureaucrats to clear the deal without any clear direction and it is expected that matter will go to the courts again.
Earlier this week, Idea Cellular received an approval from DoT to increase Foreign Direct Investment (FDI) limit in the company to 100%, from the current 67.5%. The companies expect the final approval to come by this month.
Vodafone and Idea Cellular had announced a merger last year, following the entry of a new player Reliance Jio owned by Mukesh Ambani which triggered a consolidation phase in the telecom industry forcing small and marginal players to exit the hyper-competitive market.
Airtel has acquired Telenor India and also announced the acquisition of wireless operations of Tata Group, whereas Reliance Jio has agreed to buy wireless assets of Reliance Communications, and Aircel has filed for bankruptcy. Following consolidation, the telecom industry will be left with three players - Airtel, Vodafone-Idea combine and Reliance Jio along with telecom PSU, BSNL/MTNL.
SYNERGY BENEFITS
- About $600 million is estimated to be saved as opex in fiscal year ending March 2019, while another $300 million will be saved in fiscal year ending March 2020
- DoT may raise a demand of Rs 2,100 crore as one-time spectrum charge from Vodafone-Idea Cellular for which bank guarantees may have to be submitted by the combined entity
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