Ideas for Business in India
- Wireless carriers considering an all-share deal: Vodafone
- Combination would lead to Vodafone splitting off India unit
Vodafone advanced 2.9 percent to 198.9 pence at 10:43 a.m. in London after rising as high as 201.25 pence, while Idea gained 25 percent to 97.70 rupees in India. Bharti Airtel Ltd., India’s largest carrier, also surged.
Jio’s Impact
Prior to Jio’s entry, Airtel, Vodafone and Idea were able to increase revenue and profit, even as they borrowed heavily to pay for spectrum and infrastructure. Jio, which stormed India’s crowded cellphone market with free voice calls for life, has spurred rivals to cut prices and expand their mobile broadband networks.
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A merger of Vodafone’s India business and Idea would lead to economies of scale and significant savings on spectrum for the new entity, Saeed Baradar, a telecoms sales specialist at Louis Capital Markets UK LLP, said in a note. Still, Vodafone separating its Indian unit would mean it is no longer consolidating a business that had a disproportionate impact on growth of earnings before interest, taxes, depreciation and amortization and free cash flow, Baradar said.
Ambani plans to invest a further 300 billion rupees in Jio, in addition to over $25 billion already invested in the carrier, to expand the network coverage and capacity, it said in a stock exchange filing this month. In December, Jio announced that it would offer data for free until March 31, extending its free trial period by three months.
Airtel, which reported a 55 percent drop in quarterly profit Jan. 24, said that “predatory pricing” was hurting the industry. India’s Telecom Disputes Settlement and Appellate Tribunal will hear a case Feb. 1 that Airtel filed against the nation’s telecom regulator for allowing Jio to continue its free services.
Aditya Birla Group entities, including Aditya Birla Nuvo Ltd., own 42.2 percent of Idea, according to the company’s website. Malaysian carrier Axiata Group Bhd. has a 19.8 percent stake. Vodafone India Ltd. is a wholly owned unit of Vodafone.
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