Airtel, Reliance Jio or Vodafone Idea? No clear winner in India’s telecom wars

New Delhi: Six months ago, Bharti Airtel Ltd was the undisputed leader in India’s telecom market with the largest subscriber base, highest profit and maximum revenue market share. The entry of Reliance Jio Infocomm Ltd however resulted in a bruising tariff war, which forced even a large corporate house like the Tata Group to exit the industry. Following a year-long consolidation, only two other private players were left in the field—Bharti Airtel and entity resulting from the merger of Vodafone India and Idea Cellular.

Although the dust in the telecom battleground has settled largely with three players remaining, the sector is at the cusp of an anomaly with no clear market leader emerging on key growth metrics and no distinct industry hierarchy in sight.

Sample this. Vodafone Idea Ltd, India’s largest telecom operator by users and revenue market share, is also the only loss-making company among the three—posting a ₹4,970 crore loss in the September quarter. Reliance Jio, which had 252 million subscribers compared with Vodafone Idea’s 435 million as of end-September, made a profit of ₹681 crore in the same period.

The third player, Bharti Airtel, saw revenue from its India business fall 11% on-year in July-September. It lost 2.3 million users in September alone when Reliance Jio added 13 million.

So, who is the real number one telecom company?

“Vodafone Idea may have the most subscribers and revenue market share but clearly can’t be called the number one player or the industry leader if you look at all the parameters,” a Mumbai-based analyst said, requesting anonymity.

The Cellular Operators Association of India (COAI) believes this abnormality is because of industry dynamics, which changed after the entry of Reliance Jio in September 2016. “The fundamental issue is that the industry has transformed from a voice-only network to an all-data network. The whole network has got more complex. As a result, we are wondering what are the right metrics to look at,” COAI director general Rajan Mathews said.

The lobby group believes that in the current situation, the amount of data flowing on the network and the operator’s 4G coverage would be better metrics. “4G capacity will determine tomorrow’s leader. Who has the most subscribers is not a relevant metric anymore,” Mathews said.

On 4G coverage, Reliance Jio is targeting 99% population coverage by March. Airtel has over 90% 4G coverage with an aggressive plan to grab the user’s primary 4G SIM slot. Vodafone Idea is the laggard with 50% 4G coverage. It plans to cover 70% of the country in the next six months, and 80% in 2019-20.

“Airtel and Jio are best placed to grab the low-hanging fruits and quickly upgrade customers from 2G to 4G in areas where Vodafone Idea doesn’t offer 4G currently,” an industry executive said requesting anonymity.

Jio’s 4G user base of 252 million is almost twice of Airtel and Vodafone Idea combined.

“At this time, it is not quite clear which is the industry leader among telecom operators. But this should change over a year or two as the competition is forcing telcos to focus on their product and marketing,” said Amresh Nandan, vice president and analyst (tech industry), Gartner. “The fight for the lead position would eventually not be based on subscriber size but revenue, profitability and even quality of revenue.”

Vodafone Idea is deploying technologies to handle 2G spectrum refarming to 4G.

With plans to raise up to ₹25,000 crore, Vodafone Idea also faces spectrum liabilities of ₹3,000 crore due in March and an additional ₹12,000 crore due in the middle of the next financial year, Credit Suisse said in a note on 22 November.

ALSO READ | Vodafone Idea, Airtel, Reliance Jio must agree on stress for spectrum relief

Airtel is focusing on better-paying customers while Reliance Jio is adding millions of subscribers every month by promising them the cheapest tariff.

“There is an aggressive new entrant (Jio), a mature player (Airtel) and a third player which is going through strenuous amalgamation (Vodafone Idea). The industry will have to wait for at least a year before getting a clear hierarchy in place,” Mathews said.

This isn’t a sprint any more. It is a marathon.


Original source:

Bharti Infratel and Indus Towers Merger: CCI Grants Clearance

Bharti Infratel, the tower subsidiary of Bharti Airtel, is set to undergo a merger with Indus Towers for which both the companies have obtained clearance from Competition Commission of India (CCI). Post the merger, both the companies will fuse to form $14.6 billion entity owning 1.63 lakh towers, a massive figure speaking even from global standards. This approval from CCI is the first of many which both the companies will need to have it under them if they want to move ahead with the merger. In addition to the CCI clearance both the companies will need the Securities & Exchange Board of India, National Company Law Tribunal and the department of telecommunications (DoT) to sign off on the merger. While the others will look into different aspects of the merger, DoT will sign off on the FDI aspect of the combined entity.

Bharti Airtel in its official statement said “Pursuant to Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, we are pleased to inform you that approval of Competition Commission of India (CCI) has been received for the proposed merger of Bharti Infratel Limited and Indus Towers Limited.”

Interestingly, the company which is going to merge with Bharti Infratel, Indus Towers counts Bharti Airtel, Idea Cellular and Vodafone India as its shareholders. As such, this merger is going to mean enhanced control over towers and monetisation of their stakes in the company during present tough times. This move might prove beneficial for all the three telcos since the telecom sector is in a condition of unrest, the reason being heavy losses and poor financials. Current stake-holding in Indus Towers comprises of Bharti Infratel (42%), Vodafone (42%), Aditya Birla’s Idea group (11.15%) and Providence (4.85%).

As per the current stipulated timeline, the merger process will finish before the end of FY 2018-19.

Idea Cellular, which holds 11.15% in Indus will have the option of getting a 7.1% stake in the new company, or it will also be able to sell out for Rs 6,500 crore. Idea Cellular had earlier said it would exit the tower unit. Being equal shareholders in Indus, Bharti Airtel and Vodafone will take control of the merged entity proclaiming equal representation in board too.

A lot of structure and stakeholding of the company will be dependent on Idea’s decision to retain or sell the shares. Depending on that, Bharti Airtel will own either 37.2% or 33.8% in the combined entity, and Vodafone will hold 29.4% or 26.7%. On the other hand, private equity major KKR and Canada Pension Plan Investment Board (CPPIB) will together own 6%. Providence will retain a minimum 1.1% or opt to maintain its full stake in the combined company, which will be 3.1%. The remaining shareholding will be up for the public.

Original story:

India needs 100,000 telecom towers to cater to the rising data demand

Despite a consolidation in the telecom sector, India needs around 100,000 additional towers to take care of the growing data and voice requirements. The country currently has about 461,000 mobile towers for a customer base of 1.18 billion.

The world’s second-largest telecom market is undergoing consolidation with operators either merging with larger players or closing operations altogether.

Tower companies, which lost thousands of co-locations per tower leading to drop in revenues, too are seeing the impact of consolidation. Due to the changed scenario in the sector, Bharti Infratel and Indus Towers last month announced a merger creating the world’s second largest tower firm.

However, if the figures are compared to China, which is the world’s largest telecom market, a totally different picture emerges. China has over 1.94 million telecom towers for a customer base of 1.4 billion. China Tower Corporation alone has about 1.9 million towers and the remaining 40,000 to 50,000 towers are owned by smaller firms. In contrast, the merged entity of Bharti Infratel-Indus, which is the world’s second largest tower company after CTC, will have a portfolio of 163,000 towers.

India lags far behind China in terms of investments too. Sectoral regulator Telecom Regulatory Authority of India (Trai) has been raising the issue of insufficient investment in infrastructure as the reason for call drops, a charge refuted by telecom operators. The upcoming National Telecom Policy aims to garner an investment of $100 billion in the telecom sector in five years.

“We did a comparative benchmarking with China, which has consistently spent $70 billion on telecom infrastructure per year for the past many years. We have invited $100 billion in five years. In my view, $100 billion is actually a slight underestimation. If we really want to create next-generation infrastructure, India must create a framework where we can have significant investments coming into the sector,” Telecom Secretary Aruna Sundararajan said recently.

The telecom sector in India has a huge scope for growth as the country has touched only 30 per cent broadband penetration and 70 per cent of the growth still remains to be tapped.

With the expansion of 4G, 5G, Artificial Intelligence, Virtual Reality, Internet of things and M2M etc, the country is set to witness a multi-fold growth of data which will necessitate the installing around 100,000 mobile towers across the nation in the near future,” Tilak Raj Dua, Director General, Tower and Infrastructure Providers Association (TAIPA) said.

Dua added that India extends telecommunication services to more than 1.1 billion subscribers through 461,000 mobile towers, mounted with around 1.8 million base tower stations (BTSs), as of May 2018. Approximately, 90 per cent of these total mobile towers are shared among service providers.

“While in China, there are over 1.9 million mobile towers (as per the tower exchange data), we believe, out of the total only around half a million mobile towers are shared among TSPs. The sharing of mobile tower companies in China have recently realised the significance of the sharing model, emulating the Indian success story”, Dua added.

In India, the sharing concept started in 2005. Under the sharing concept, the towers are shared on a non-discriminatory and transparent basis. The concept has advantages such as efficient use of capex, improved aesthetics, faster rollouts, energy savings, and better coverage quality.

“India is the first market to develop and adopt this model, after which it has been emulated globally and is a Harvard business School case study,” Dua signed off saying.

Bharti Airtel Approves the Merger of Indus Towers and Bharti Infratel

Bharti Airtel has now approved the merger proposal of Bharti Infratel and Indus Towers, creating a listed pan-India tower company. The combination of Bharti Infratel and Indus Towers by way of a merger will create a pan-India tower company, with over 163,000 towers, operating across all 22 telecom circles in India. The combined company will be the largest tower company in the world outside China, read a media statement. The combined company will be named as Indus Tower Limited and will continue to be listed on the Indian Stock Exchanges going forward. The merger is now subject to approvals from the relevant regulatory authorities, including from CCI, SEBI, NCLT, DoT (FDI approval), approval from Bharti Infratel’s shareholders, necessary corporate approvals from the companies involved, as well as closing conditions. The transaction is expected to complete before the end of the financial year ending March 31, 2019.

Indus Towers is currently jointly owned by Bharti Infratel (42%), Vodafone (42%), Idea Group (11.15%) and Providence (4.85%). They today announced that they have agreed to merge Vodafone’s, Idea Group’s and Providence Equity Partners’ respective shareholdings in Indus Towers Limited into Bharti Infratel, creating a combined company that will own 100% of Indus Towers. Post the transaction, the combined company’s equity value would be Rs 965 billion.

That said, the combination of the two highly complementary footprints will create a tower operator with the ability to offer the high quality shared passive infrastructure services needed to support the pan-India expansion of wireless broadband services using 4G/4G+/5G technologies for the benefit of Indian consumers and businesses. And the media statement also read that the move will also help in the delivery of Government of India’s vision of ‘Digital India’.

Idea Group has the option to either sell its 11.15% shareholding in Indus Towers for cash based on a valuation formula linked to the VWAP for Bharti Infratel’s shares during the 60 trading days prior to completion of the merger, which, if calculated at the time of this announcement, would equate to a cash consideration of Rs 65 billion. Alternatively, Idea Group will receive new shares in the combined company based on the Merger Ratio. All the proceeds from the sale of the 11.15% stake will be for the benefit of the entity resulting from the merger of Vodafone India and Idea Group.

Speaking about the Providence, it has the option to elect to receive cash or shares for 3.35% of its 4.85% shareholding in Indus Towers, with the balance exchanged for shares.

Vodafone will be issued with 783.1m new shares in the combined company, in exchange for its 42% shareholding in Indus Towers. On the basis that Providence decides to sell 3.35% of its 4.85% shareholding in Indus Towers for cash, and Idea Group decides to sell its full 11.15% shareholding in Indus Towers for cash, these shares would be equivalent to a 29.4% shareholding in the combined company. The Transaction values Vodafone’s shareholding at Rs 284 billion.

If Providence decides to sell 3.35% of its 4.85% shareholding in Indus Towers for cash, and Idea Group decides to sell its full 11.15% shareholding in Indus Towers for cash, Bharti Airtel’s shareholding will be diluted from 53.5% in Bharti Infratel to 37.2% in the combined company.

Having said that, the final number of shares issued to Vodafone and the cash paid or shares issued to Idea Group and Providence, will be subject to closing adjustments, including but not limited to movements in net debt and working capital for Bharti Infratel and Indus Towers. To be noted, Bharti Airtel and Vodafone will jointly control the combined company, in accordance with the terms of a new shareholders’ agreement.


UK operators spend £1.4B in 4G, 5G auction

The UK’s four existing operators shared the spoils in the country’s maligned spectrum auction, with Telefonica UK securing extra airwaves for 4G and Vodafone winning the largest allocation of 5G-ready spectrum.

In the 3.4GHz band, earmarked for the country’s 5G services: Vodafone UK won 50MHz for £378 million; market leader EE and O2 parent Telefonica UK both won 40MHz for £303 million and £318 million respectively. CK Hutchison’s 3UK – which launched repeated legal bids contesting the rules of the auction – paid £151 million for 20MHz.

Telefonica UK was also allocated the complete lot of 4G-suitable spectrum being auctioned, paying £206 million for 40MHz in the 2.3GHz band.

As the country’s largest existing holder, EE’s bidding was limited by the controversial spectrum caps imposed in the auction rules.

In total, regulator Ofcom secured £1.4 billion from the country’s four existing operators. Ofcom said the principal stage of the auction was now complete and it would assign specific segments of spectrum in the coming days.

The other bidder, Softbank-backed Airspan Spectrum Holdings failed to win spectrum in either band. A fifth potential bidder, Connexin, dropped out of the process before the auction began on 20 March.

The auction was originally due to be conducted in 2017, but was delayed after EE and 3 contested the spectrum caps imposed by Ofcom. While EE argued there should be no cap at all, 3 – the country’s smallest operator – said the caps were too high and didn’t do enough to address competition concerns.

Courts ruled in favour of the regulator in December 2017, with a subsequent appeal by 3 rejected in February.

CCS Insight principal analyst Kester Mann said O2 was the “big winner” as it added “much needed” 4G capacity, but added the outcome was less positive for 3 as it did little to improve its “precarious market position.”

“Having campaigned tirelessly for more favourable conditions, it was surprising not to see it spend more,” he noted, adding: “It will be particularly disappointed to miss out on the vital 4G airwaves to support its data-hungry customers. 3 remains sub-scale and without fixed-line assets in a market gradually moving towards multiplay services and today’s outcome will do little to dampen doubts over its long-term future.”

ATC completes Vodafone India’s tower acquisition deal

American Tower Corporation (ATC) has completed the deal to acquire telecom towers held by Vodafone India. This will consolidate the American company’s position as the country’s second-largest telecom tower company. The deal is expected to be announced soon.

“The deal has been concluded with an official announcement expected anytime soon, most probably this week itself,” a source close to the development told BusinessLine.

In November 2017, ATC had announced its intention to acquire the towers assets of Vodafone India and Idea Cellular. According to sources, the tower acquisition agreement with Idea will be announced separately later.

For ATC (formerly Viom), both the transactions combined are expected to generate about ₹2,100 crore in property revenue and about ₹800 crore in gross margin in the first full year of operations. Idea Cellular, which is expected to rake in ₹4,000 crore from the deal, will allow the company to use the proceeds to strengthen its balance sheet.

Vodafone India will get ₹3,850 crore from the deal.

Vodafone India offered no comments while Idea Cellular spokesperson was unavailable for comments.

The ongoing consolidation in the Indian telecom sector had resulted in ATC losing nearly 57,500 tenancies in India primarily due to the spate of exits by struggling mobile operators. The highest churn, for ATC, of 30,000 tenancies was from Tata Teleservices, which had sold its mobile business to Bharti Airtel in October last year, sources had told BusinessLine in March.

On March 20, 2017, Vodafone India and Idea Cellular announced plans to merge their mobile operations to create the largest operator in the country.

Vodafone plans VoLTE service in Zambia

Vodafone will launch voice service in Zambia within three months under a newly acquired licence from the Southern African nation’s communications regulator, the firm said on Tuesday.

Vodafone Zambia chief executive Lars Stork said in a statement the Zambia Information and Communications Technology Authority had allowed it to launch voice over data service, in addition to its current data-only offering.

“Today our LTE network is solely used for data traffic, however our vision and strategy is to offer best in class data and now also voice over data on our 4Gnetwork,” Stork said.

South Africa’s MTN, India’s Bharti Airtel and state-owned Zamtel are the only mobile phone operators currently offering voice services in Zambia.

Zambia last week selected a unit of Dutch company Unitel International Holdings as the country’s fourth mobile phone service provider.


Bharti Infratel, Indus Towers planning merger to create telecom tower giant

Mumbai: Bharti Infratel Ltd and Indus Towers Ltd—two of India’s largest telecom tower firms—are planning to merge their businesses, three people aware of the matter said.

Vodafone India Ltd and publicly traded Bharti Infratel Ltd hold 42% each in Indus Towers. Idea Cellular Ltd owns 11.15% and US-based private equity fund Providence owns 4.85%.

Bharti Infratel was earlier planning to acquire a controlling stake in Indus Towers and make the latter a subsidiary.

According to that plan, Bharti Infratel was to acquire the stake it didn’t own in Indus Towers in an all-cash transaction and later sell the combined business to external investors.

“Both Vodafone and Idea wanted cash from the deal; now they want to stay invested in their tower business as they expect valuation of the business to go up in the near term. Also, the companies do not need cash at the moment,” said a person aware of the matter.

Vodafone India and Idea Cellular are set to merge this year to create India’s largest telecom operator, surpassing Bharti Airtel Ltd.

The merged entity of Vodafone India and Idea now expect to have additional cash of about Rs21,000 crore in the first year, which includes Rs6,750 crore raised by Idea through sale of shares to institutional investors, Vodafone’s investment of Rs6,750 crore and about Rs8,400 crore from savings in operational and capital expenditure, another person with direct knowledge of the matter said.

A Vodafone India spokesperson declined to comment while an email sent to Idea remained unanswered.

A Bharti Infratel spokesperson said, “As a policy, we do not comment on market speculation. Being a responsible corporate, we always make appropriate disclosures to the stock exchanges and our stakeholders as and when required.”

The decision to merge the two tower companies comes in the wake of Airtel’s announcement that it would list its Africa business to raise money.

The new arrangement will also give freedom to each of the stakeholders in the merged tower entity to sell their stakes at their convenience.

“It is all about financial benefit. Everybody is working on this. It is being done internally,” said this person.

The valuation of a tower whose tenancy rates used to be Rs50 lakh has now declined to Rs30-35 lakh, according to a Mumbai-based analyst with a brokerage.

The number of tower tenancies in India has also fallen from 500,000 to 400,000.

“There has been a price correction of about 20% in the industry,” the analyst said, requesting anonymity, citing examples of the tower sale by Vodafone India and Idea Cellular, who agreed to sell their standalone telecom tower businesses to ATC Telecom Infrastructure Pvt. Ltd in November.

“The tower sale was earlier pegged at Rs50 lakh per tower. However, Idea/Vodafone got about Rs40 lakh per tower from ATC in the deal,” the analyst said.

There would be a further price correction in the tower business after Vodafone and Idea complete their merger, which will lead to a decline in the number of towers required for the merged entity to function.

“The minute this merger (Idea-Vodafone) gets announced, the valuation of towers will go down further,” said the first person cited earlier, adding that valuation of tower business will start to go up when telcos will start investing massively to ramp up infrastructure to meet data demand, which is expected to go up from around 20 petabytes a day to about 120 petabytes a day in the near term.

“Once the telcos start announcing their capex, valuation will start growing up,” the person added.

The merged entity of tower companies will have 240,000 towers.

Airtel, Vodafone, Idea want government to postpone 5G spectrum auctions till FY2020

The telecom sector wants the government to put off auction of 5G spectrum till 2019-20 to give time for a devices ecosystem to develop and allow the industry to overcome its financial stress and consolidate completely.

The government “must not rush into any spectrum auction this year” as the industry is reeling under acute financial duress, and auction of any spectrum band, including 5G, must be initiated “only once all consolidation has been announced and locked down”, said Rajan Mathews, director general at Cellular Operators Association of India (COAI).

COAI is the apex industry grouping representing top telcos Bharti Airtel, Vodafone India, Idea Cellular and Reliance Jio Infocomm.

Telcos are particularly at odds with sector regulator Trai’s recent suggestion for National Telecom Policy 2018, urging the government to swiftly identify and make available new spectrum bands in the backhaul and access segments for growth of 5G networks.

“Given that regulatory and technical standards for 5G are still under deliberation at the global level, 5G spectrum should be auctioned only after the ecosystem is developed, which is why, FY2020 may be an appropriate time to do so as there will be better use cases and apps for 5G, for which at least a year to 18 months are required,” Mathews told ET.

Scheduling an auction of 5G airwaves in FY20, he said, would also “allow for a better understanding of the value of 5G spectrum and the resultant price to bid”.

Telcos’ reluctance to participate in another mega auction in the near term comes even as the government plans to put up a whopping 3,000 units of radio waves, including 5G bandwidth, in the next spectrum sale, timelines for which remain undecided.

Telecom secretary Aruna Sundararajan on Wednesday said spectrum supporting 5G services and fiberisation of networks would be part of National Telecom Policy 2018, which is being formulated by the telecom department, and the draft would be put out for public consultation in three weeks.

Telecom minister Manoj Sinha, too, had recently told Parliament that 5G airwaves in the 3300-3400 MHz and 3400-3600 MHz bands would be part of the next spectrum auction.

The government has sought suggestions from the Telecom Regulatory Authority of India (Trai) on the reserve price and related issues such as when the next auction of spectrum in seven frequency bands, including 5G airwaves, should be held.

A senior industry executive, who did not wish to be named, said the government should ideally allow the telecom market to settle down in the wake of recent mergers and acquisitions as it is only “post-consolidation that telecom companies would look at any additional spectrum needs after they put their networks together”.

Telcos’ call to delay the next spectrum auction comes at a time when the sector is plagued by fierce price wars and saddled with debt upwards of Rs 7-lakh crore.

Over the past 15 months, incumbents Airtel, Vodafone and Idea have seen a sharp fall in their revenue and profits in the face of price competition since Jio’s entry in September 2016. This has led to consolidation in the industry, leaving Bharti Airtel, Jio and the emerging Vodafone-Idea combine as the only major private players.