Vodafone Group said its merger with Idea CellularBSE 0.22 % will give the two stronger negotiating muscle in negotiations with Bharti AirtelBSE -2.47 %, which needs to agree to any move by the combining carriers aimed at divesting their stakes in Indus Towers to reduce debt in the new entity.
“It is obvious that now with Voda and Idea together, it makes our voice at the table stronger for their 11 per cent and our 42 percent,” said Vodafone group CEO Vittorio Colao during an analyst call after announcing the merger of its India business, excluding the Indus stake, with Idea Cellular on March 20.
The ownership of Indus Towers, the world’s largest telecom tower company with over 122,000 towers, is split among AirtelBSE -2.47 % (42 percent), Idea Cellular (11.15 per cent), Vodafone (42 per cent) with Providence owning the rest. Vodafone’s 42 per cent stake is not part of the mega-merger deal while Idea’s 11.15 percent is.
As per the shareholders’ pact, Airtel, Vodafone, and Idea need to agree to any of their partners moves to sell down or exit the venture.
Colao though clarified that there was no tussle with Airtel on this.
“I wouldn’t characterise as control versus non-control. I would characterise this as an agreement. The Vodafone India-Idea merger will unleash the opportunities on the Indus Tower one. And we will be all aligned in a good monetisation solution,” Colao said.
Prior to completion of the merger, Vodafone and Idea have said they intend to sell their standalone tower assets and Idea’s 11.15 per cent stake in Indus Towers to reduce debt in the combined company which roughly stands at Rs 1.07 lakh crore. The CEO confirmed that the merger will take place in the next 12-18 months.
Vodafone Group will also explore strategic options for its 42 per cent stake in Indus Towers, including a partial or a full sale. Both companies are reported to have been in talks to sell their tower businesses and, according to reports, Idea has held exploratory talks with ATC for the same.
The analysts also questioned the group CEO and CFO on Jio, which is touted to be one of the key reasons for the consolidation taking place in the Indian telecom sector including the Idea-Vodafone proposed merger.
Group CFO Nick Read said that Vodafone had spotted retention of high-value customers given increased bundle sizes, but their ARPU (average revenue per user) is slightly diluted. “Both low-value and medium-value RPUs are stabilising. So, I would say we’ve seen some encouraging signs of stabilisation, and obviously we’ll have to see the dynamic once Jio starts charging in April.”
Following Reliance Jio’s tariff plan announcement, other telcos have offered plans in the Rs 300-350 band, fundamentally capping the ARPU for the sector. Jio will charge its 100 million plus customers from April.
Source: Economic Times