Telecom giant is born

DECCAN CHRONICLE.
Published Mar 21, 2017, 12:40 am IST
Updated Mar 21, 2017, 6:58 am IST
The tariff wars triggered by the third-largest player, Reliance, will go on longer.
Idea and Vodafone
 Idea and Vodafone

The Vodafone-Idea merger will create the country’s largest telecom entity, with 40 million subscribers. The Indian consumer, belonging to one of the world’s largest cellphone-using markets, will be delighted. The tariff wars triggered by the third-largest player, Reliance, will go on longer. The very idea that unlimited free calls and 1GB data can be offered for Rs 10 a day has given birth to this second telecom revolution. What the penetration of smartphones and data use can do by giving access to knowledge makes it an exciting time in India. What the deal does for investors in a combined entity with a Rs 80,000-crore revenue is open to question.

The euphoria over the deal led to a short buying spree of Idea stock before players possibly realised the valuation of the hitherto smaller player was not exciting enough. In any case, telecom firms must be ready to bleed for years with tightening revenues and the need to service a combined estimated debt of Rs 3.8 lakh crores, as declared to the Supreme Court at the spectrum case hearings, of which Vodafone-Idea’s will be around Rs 1.07 lakh crores. Consolidation may lead to lower costs in operations, but then the data wars may get sharper with fewer players in the market, and that will ensure that the customer is the one who will benefit more than service providers. The effectiveness of free markets is seen in how far the phone user has come in a little over 20 years after decades of MTNL-BSNL monopoly in communications ended.


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