Connect with us

Daily News

CapEx by Idea, Vodafone India Sees Decline in FY18

Capital expenditure by Idea Cellular and Vodafone India, which had been growing till FY17, saw a decline in FY18. The CapEx of Rs 7,000 crore by Idea and Rs 7,251 crore by Vodafone in FY18 was lower than their spend in FY16 as well as FY17. With the entry of Reliance Jio with VoLTE technology, the incumbent operators are under pressure to move to this technology at a rapid pace and also increase their cell sites, all of which necessitates that CapEx rises. In fact, Bharti Airtel’s CapEx in FY18 rose to Rs 26,818 crore from Rs 19,874 crore in the previous fiscal.

Analysts have explained the lower CapEx by Idea and Vodafone in FY18 as being due to their merger, which was announced in March 2017 and currently awaits final approval from the department of telecommunications. Once the merger is approved, several areas where there’s duplication would be synergised, which would lead to cost saving in CapEx as well as OpEx.

“Idea and Vodafone will need to step up CapEx as their data capacity utilisation is high at 78%. It is translating into lower data speeds according to various surveys and is likely to weaken customer experience, impacting data subscriber addition. Due to stretched balance sheet, we expect external funding to become expensive and CapEx improvement will largely be driven by OpEx synergies,” Edelweiss Securities said in its note on Idea, adding, “Idea will benefit from operating cost and CapEx synergies post merger with Vodafone.”

In the meantime, lower CapEx is showing in the case of the cellsites added by Idea compared with peers. For instance, it added 45,000 mobile broadband sites in FY18, well below the 109,000 added by Bharti. Vodafone added 48,500 sites during the year.

“Idea Cellular and Vodafone could achieve cost synergies of Rs 8,400 crore and CapEx synergies of Rs 5,600 crore within 3-4 years of the merger,” UBS Securities said in its report on the Indian telecom industry. It said that OpEx comprises by far the largest cost component and with 20% sites possibly up for removal, the savings in terms of tower lease and utility costs are expected to be significant. “Roughly 15-20% OpEx and CapEx savings are possible once the merger is finalised,” it added.

Both the companies have indicated that as many as 20% sites are duplicated and can be eliminated post-merger.

Idea has around 134,000 sites and Vodafone has 140,000 sites. Both could eliminate 55,000–60,000 sites post merger.

Both the companies have earlier said in their joint statement that the merger will result in savings of around Rs 14,000 crore annually by the fourth full year post-completion through sharing of resources like staff, network infrastructure and spectrum.

Once the merger of Idea and Vodafone is complete, the combined entity would have total revenues of over Rs 80,000 crore, higher than Bharti Airtel’s India revenues, 400 million customers, 35% subscriber market share and 41% revenue market share. – Financial Express

Click to comment

You must be logged in to post a comment Login

Leave a Reply

Copyright © 2023 Communications Today

error: Content is protected !!