KOLKATA: Vodafone India and Idea Cellular appear to be trying to rapidly conform to the subscriber market share cap rules as their merger process gathers speed after recent key clearances, analysts said, pointing to their combined loss of 3.7 million customers in July.
The country’s No. 2 carrier Vodafone India lost nearly 1.4 million customers last month, while No. 3 Idea lost over 2.3 million, according data collated by the Cellular Operators Association of India (COAI).
“Both Vodafone India and Idea appear to be letting go of low-ARPU (average revenue per user) customers in markets where their combined subscriber market share is well above the 50% permissible limit for telecom M&As,” Nitin Soni, director at global rating agency Fitch told ET. This view was backed by Mayuresh Joshi, telecoms analyst at Angel Broking.
This, Soni said, “can be easily done”, especially in a hyper-competitive market, if telcos
decide not to aggressively invest in promotional activity in some circles.
A closer look at the COAI data shows Vodafone and Idea’s subscriber reductions last month have been sizeable in key markets such as Maharashtra, Gujarat, Haryana, Madhya Pradesh, UP-West and West Bengal, where their combined customer market shares are as high as 59%, 56%, 62%, 59%, 55% and 51%, respectively, which is above the limit prescribed for merged entities.
COAI’s July subscriber numbers reveal Vodafone and Idea cumulatively lost over 443,000 customers in Maharashtra, over 245,000 in Haryana, over 290,000 in Madhya Pradesh, 156,000 in UP-West, 146,000 in West Bengal and 76,000 in Gujarat.
India’s telecom M&A rules require that a merged entity’s combined subscriber market share and revenue market share (RMS) should not exceed 50% in any circle.
The shedding of customers has benefited new entrant Reliance Jio the most and market leader Bharti Airtel to some extent, analysts said.
Vodafone and Idea received an unconditional clearance for their $23 billion merger from Competition Commission of India on July 24 and a conditional approval from the Securities and Exchange Board of India (Sebi) about two weeks ago.
Email queries to the two companies remained unanswered till as of press time on Wednesday.
A person familiar with the matter said the two telcos have been losing subscribers due to Jio’s offers of rock-bottom data prices with voice free for life. Vodafone and Idea had previously said that they have been hurt by hyper-competition triggered by the entry of Jio.
“Gone are the days when a telco’s spectrum allocation was linked to its customer base. With that no longer the case, there is also no incentive to retain the least active/dormant users,” said sector veteran BK Syngal, a former chairman of erstwhile VSNL (now Tata Communications), said.
The Vodafone-Idea merger deal, once completed, will create India’s biggest phone company with a combined user base of about 400 million and 41% revenue market share. The merged entity, with its scale, size and synergies, is expected to be a stronger rival to Jio.