Bharti Airtel Ltd is building a war chest to take advantage of regulatory hurdles that Vodafone India Ltd and Idea Cellular Ltd will face if their proposed merger goes through, according to two people familiar with the development.
The merged entity will exceed the 50% subscriber and revenue market limit in at least six licence areas and will have to cede share to rivals such as Bharti Airtel to secure regulatory approval, analysts said.
Telecom regulations in India that limit maximum market share and spectrum holdings are among hurdles that Vodafone India, the country’s No. 2 carrier, and No. 3 Idea Cellular will have to deal with as they look to create the country’s largest cellular network with more than 380 million users.
Bharti Airtel, India’s largest telecom carrier, plans to target Vodafone and Idea customers through a series of innovative schemes and tariff plans in circles where the merged entity will have to let go customers, a person familiar with Airtel’s plans and one of the two cited above said, requesting anonymity. A Bharti Airtel spokesperson declined to comment.
Bharti Airtel would also want the proposed merger to be delayed as long as possible so that it gets room to bridge the gap with the combined entity, the second person cited above said, also requesting anonymity.
“I see no reason why Airtel won’t benefit out of the merger process,” said a top executive at a rival telecom firm.
According to Telecom Regulatory Authority of India rules, an operator can hold a maximum of 50% revenue share, 50% subscriber share and 50% spectrum share in each band (excluding 800 Mhz) in each circle.
As on end-October, 2016, the number of Idea and Vodafone subscribers stood at 180.3 million and 201.9 million respectively, which would mean a subscriber base of 382.2 million subscribers for the merged entity versus subscriber base 262.3 million subscribers for Bharti Airtel.