Vodafone India and Idea Cellular combine will have to forego 14 million subscribers in six circles and revenues of more than ₹2,000 crore in three circles as the merged entity will breach the Department of Telecommunications (DoT)-prescribed 50% cap on subscribers and revenue in the respective States.
Vodafone-Idea (the proposed name of the merged entity), India’s largest telco by subscriber base (423 million), breaches the DoT prescribed cap of 50% for subscriber market share in six circles of Gujarat, Haryana, Kerala, Madhya Pradesh, Maharashtra and Uttar Pradesh (West). As per DoT’s merger and acquisition (M&A) guidelines notified in 2014, the combined entity has to reduce its subscriber share to below 50%, in circles where such cap is breached, within a year from the effective date of licence transfer.
Subscriber base
Accordingly, the company will have to reduce the number of its subscribers by about 6.9 million in these six States. The combined entity, which will command 37% of the RMS (₹63,000 crore), breaches the DoT-prescribed cap of 50% for Revenue Market Share (RMS) in three circles of Gujarat, Kerala and Madhya Pradesh.
To comply with the RMS cap of 50%, the combined entity would be required to reduce the annual revenues in these three circles by more than ₹2,000 crore, representing 3.3% of the revenues post merger. To achieve this, the entity would have to further reduce the number of its subscribers by 7.2 million to avoid the RMS breach in three States.
A Vodafone spokesperson in an e-mail reply to a query by The Hindu said, “As per current M&A guidelines, both the subscriber and revenue market share limits need to be addressed within one year post-merger.
“This would create the ideal platform for poaching by competition like Reliance Jio and Bharti Airtel to bolster market share in these large telecom circles,” Paras Bothra, head of equities, Ashika Stock Broking told The Hindu.
