The acquisition of the consumer mobile business of Tata Teleservices will fortify Bharti Airtel's position in the telecom market and help it catch up with soon-to-be-merged Idea-Vodafone combine, say sector analysts. Market watchers have given a thumbs up to the acquisition that involves Airtel taking over the customers and spectrum of Tata Teleservices and Tata Teleservices Maharashtra in a cash free and debt free deal. Some analysts have even gone to the extent of saying that the takeover places the Sunil Mittal company to potentially "retain" the numero uno position even post Idea-Vodafone merger.
The shareholders of Idea Cellular have approved merger scheme of its mobile business with Vodafone India. Commenting on the Bharti-Tata announcement, Bank of America Merrill Lynch in its latest report said: "We see the merger generating opex (operational expenditure) and capex (capital expenditure) synergies for Bharti, and fits in well with its strategy of acquiring spectrum from smaller players, as they have done in recent past in transactions with Telenor, Aircel, Qualcomm, Videocon and Augere wireless". The transaction will contribute to positive EBITDA within a few quarters of completion, it added.
The earnings before interest, tax, depreciation and amortisation (EBITDA) is a measure of a company's operational performance. "We view this deal as being incrementally positive for Bharti, and places it for potentially retaining the number one share even post Vodafone-Idea merger," said the report. Financial services firm UBS said that near-term earnings downside notwithstanding, it saw Bharti Airtel as a key long-term winner given its scale, spectrum footprint and network headstart. The deal, that made headlines yesterday, would add roughly 40 million subscribers and four percent revenue market share to Airtel, besides giving the company access to 71.3 Mhz liberalised spectra at a throwaway price.
The latest deal, along with other acquisitions closed by Airtel, will take its combined revenue market share to 40-41 percent, estimated UBS. Noting that Bharti's acquisitions, including yesterday's, have been opportunistic and inexpensive, BNP Paribas report said the strategy has enabled the company to significantly enhance its revenue and spectrum market share. "Bharti continues to make the right moves and remains well-positioned as the industry recovers. After this deal, Bharti will have almost caught up with the market leader Idea-Vodafone, and seems well positioned to regain market leadership in the medium term," said the report. Deutsche Bank declared that the sector consolidation is "largely over" now with the latest deal. "It (Bharti) has leveraged the current environment to the maximum by acquiring spectrum and customers of marginal players at minimal enterprise value. We believe Bharti has the cost position and spectrum portfolio to defend its margins and cash flows against Jio," Deutsche Bank said.
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