Bharti Airtel faces high costs, isolation if Vodafone Idea exits Without VIL, Bharti Airtel would lose out on benefits of shared towers infrastructure, which could lead to an increase of at least 15% in network and customer servicing costs and hinder its ability to offer affordable tariffs to consumers in future, said the analysts. By Read more at: https://economictimes.indiatimes.com/industry/telecom/telecom-news/bharti-airtel-faces-high-costs-isolation-if-vodafone-idea-exits

KOLKATA: Bharti Airtel stands to lose if Vodafone Idea collapses under the weight of its adjusted gross revenue (AGR) dues of more than Rs 53,000 crore, said a few analysts. Their view is contrary to the widespread belief that the Sunil Mittal-owned operator would gain in a two-private player market.

Without VIL, Bharti Airtel would lose out on benefits of shared towers infrastructure, which could lead to an increase of at least 15% in network and customer servicing costs and hinder its ability to offer affordable tariffs to consumers in future, said the analysts.

Bharti Airtel, they said, would also be without a trusted partner, if Vodafone Idea exits, in combating a challenging regulatory environment, especially when facing a strong adversary like Reliance Jio Infocomm, the new telecom market leader. Bharti Airtel chief executive Gopal Vittal recently said it is important that VIL survives and India remains a three-player market.

“Bharti may have a tough time continuing its low-cost model if VIL breathes its last,” said SBICap Securities research head Rajiv Sharma, adding that “creation of tower companies such as Indus has helped both incumbent telcos get external capital to fund their own capex.” The shared infrastructure model has helped Bharti Airtel and VIL offer lower tariffs to consumers, said Sharma. ET’s email queries to Bharti Airtel were unanswered till press time.

Nitin Soni, director (corporates) at global rating agency Fitch said VIL’s exit from the sector could “lead to cost increases for Airtel in future tower contracts, assuming the pending Bharti Infratel-Indus merger goes through and Bharti deconsolidates the merged towers entity.” However, Soni said, “Benefits of potential customer gains for Airtel if VIL exits, would more than offset likely cost increases in future tower contracts.” Sharma disagreed, saying, “Airtel may indeed gain 40% of  Vodafone Idea’s customers if the latter shuts down, but it would miss a partner to echo its voice on regulatory issues, which may possibly be worrying Bharti.”

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