Vodafone-Idea merger to boost margin; credit positive: report


Mumbai, Feb 08 :
The proposed merger between Vodafone and Idea Cellular is a credit positive for the telecom sector and will push the combined entity’s margins up by around 3 percentage points on cost synergies, India Ratings said today.
“The combined entity’s operating margins will improve by around 3 percentage points due to cost synergies in networking and selling, general and administrative expenses,” the rating outfit said in a report.
The merged company will a revenues in the Rs 77,500- 80,000 crore range and the pretax profit margins will be around 28 per cent, it said.
For the industry as a whole, even though Reliance Jio’s aggressive posturing will continue to cause troubles in the near-term, the merger is a credit positive and may help improve the return on capital employed by 3 percentage points by financial year 2019, while the total capital deployed will also rise by 90 per cent.
The merged entity’s subscriber base will be over 380 million or 37 per cent of the industry, compared to Airtel’s 262 million, while the revenue market share will be around 30 per cent as same as Airtle’s.
It will complement the circle presence of both the entities – Idea has strong presence in rural areas and Vodafone in urban centres, the report said.


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