On August 31, 2018, Vodafone India and Idea Cellular announced the formal completion of their merger, paving the way for one of the biggest mergers in the history of the Indian telecom sector.

tele.net did a special feature in February last year, when the merger had been just announced. The story was a forward-looking one, optimistic about the Voda­fone-Idea merged entity emerging as a formidable player in the Indian telecom industry. It talked about an upturn in the fortunes of the two operators, which were showing signs of a financial crisis in the face of growing competition.

While the combined entity is today the biggest operator in terms of subscriber and revenue market share, it is in a rather precarious financial position as compared to the time when the merger was first announced. Back then, the two companies had reported a combined EBITDA of Rs 244 billion for the 12-month period ending December 2016. Their profit has now dipped to Rs 107 billion in 12 months till June 2018. The merged entity’s net debt is currently about 15 times its profit (the net debt to EBITDA ratio was roughly 4.4 times in March 2017). There has been considerable cash burn by the two operators owing to relentless and ruthless price wars.

Meanwhile, Vodafone Idea Limited’s (VIL) battle with former market leader Bharti Airtel and challenger Reliance Jio is far from over. Airtel is trailing VIL by a mere 5 per cent in terms of revenue market share, while Jio has been rapidly closing the gap. Jio continues to play aggressive on service pricing, but has still managed to double its revenue share in the last four quarters. Further, VIL trails both Airtel and Jio in terms of network investments.

That said, it can leverage its large spectrum footprint in the 900 MHz and 1800 MHz 4G bands in the premium Metro and Category A circles to gain an edge on its rivals in the data war.