You are using an older browser version. Please use a supported version for the best MSN experience.

Can Vodafone-Idea take on Reliance Jio?

India Today logo India Today 21-03-2017

After a couple of months long executive level discussions, the global giant Vodafone and Aditya Birla group controlled Idea Cellular --- the second and third largest mobile network operators in India with around 200 million subscribers each--- decided to merge their telecom operations in the country to take on Reliance's Jio. There are many takeaways from the deal, especially when the Indian telecom industry is going through tremendous disruption.

Replay Video

According to Vodafone CEO Vittorio Colao, the play in the Indian telecom industry has become data-driven, taking the voice a back seat. He prefers to focus on the next technology like 5G, sailing through the 4G wave unhurt.

Jio has started afresh with new technology and its supportive infrastructure while incumbents have the legacy issues. In addition, Reliance is all out to flush money to capture the market--- their subscriber base rose 100 million in 170 days of Jio's launch. The launch offer of free service is going to end by March-end. But Reliance has launched Rs 10 a day service for its premium customers to retain subscribers for the next one year. This indicates that the Jio customers will get ample data and free voice at Rs 300 a month. Can the incumbents crack into the tariff war?

The Idea-Vodafone merger will bring in synergy of operations and help boosting the market share. But how can they play out in the price war? If they couldn't bring mass appealing tariff plans, the joint entity's value will shrink with the exodus of customers. 

Capital infusion is another risky area for the incumbents in today's time. The lead players--- both the merged entity and Airtel--- will have to pump in huge capital for upgrading their infrastructure. Reliance has the advantage of cash flow from its oil business. Since both oil and Jio comes under one entity, they could use the cash flow across the different businesses. Jio has already committed another Rs 1 lakh crore investment in the couple of years. 

Can Vodafone-Idea take on Reliance Jio? © Provided by India Today Can Vodafone-Idea take on Reliance Jio?

Vodafone's earnings before interest, taxes, depreciation and amortization (EBIDTA) for the last financial year stood at Rs 13,115 crore while Idea reported an EBIDTA of Rs 11,909 crore. Reliance had an EBIDTA of Rs 52,503 crore in the same period. The question is going to be who can stay on investing without bleeding. 

For the success of the merged entity, Vodafone will have to play with its technological expertise and use its experience in other parts of the world. They should have an India focused growth plan. Once its back in track, the capital will not be an issue, considering the it's partnership with Aditya Birla group. 

ALSO SEE: 14 iconic products that have come back from the dead

Icons reborn: The news that Nokia's much-loved and near-indestructible 3310 phone is to be relaunched set the internet aflame last week. Tapping into our love of nostalgia and appreciation for classic design, the 3310 is just the latest in a long line of famous products that have been resurrected by popular demand. As factories begin to churn out the handset once again, we take a look at some of the most welcome product comebacks in retail history. 14 iconic products that have come back from the dead

More from India Today

image beaconimage beaconimage beacon