look news india
A huge strategic reversal is being seen in the country’s telecom sector between the dominance of Jio and Airtel. Struggling with debt crisis and network expansion challenges, private telecom company Vodafone Idea (Vodafone Idea – Vi) and public sector giant Bharat Sanchar Nigam Limited (BSNL) have joined hands to utilize each other’s strengths. A broad agreement has been reached between the two companies regarding active and passive network sharing in all 22 telecom circles of the country. As soon as the news of this historic strategic partnership came out, Vodafone Idea shares witnessed a stormy rise in the stock market and the stock touched its 52-week high with huge trading volumes.
Infrastructure sharing in all 22 circles: What is the mathematics of this megadeal?
According to information received from telecom sources and regulatory circles, this partnership is mainly based on optimal resource utilization of the resources of both the companies. Under the agreement, Vodafone Idea and BSNL will share each other’s mobile towers, optical fiber cable (OFC) backbone, Base Transceiver Station (BTS) and transmission equipment.
In a country with a vast geographical area like India, setting up new telecom infrastructure to every corner is extremely expensive and time-consuming. BSNL has the strongest and largest optical fiber and tower network in remote, rural and strategic border areas of the country. Whereas Vodafone Idea has modern spectrum and strong urban network infrastructure in metro, tier-1 and tier-2 cities. With this union of the two, the network coverage of both the operators across the country will be doubled overnight without spending huge capital.
Huge savings in capex and 4G/5G rollout will get superfast speed
The biggest economic benefit of this network sharing agreement will come in the form of reduction in capital expenditure (CapEx) and operating expenses (OpEx) of both the companies. Both the companies will not have to spend thousands of crores of rupees separately for setting up new towers or laying new fiber lines. This will help Vodafone Idea to accelerate the pace of its much-awaited 4G network expansion and 5G rollout manifold.
Government telecom company BSNL, which is rapidly implementing indigenous 4G stack across the country and is preparing for 5G upgrade, will also get tremendous backup from this deal. BSNL will directly benefit from Vi’s existing infrastructure to provide uninterrupted high-speed data to its customers in urban areas. This move will enable both the operators to strongly counter the two-way competition from Reliance Jio and Bharti Airtel in the market.
Customers will get direct benefit: the problem of call drop will end.
This network sharing agreement will have a direct and positive impact on crores of common mobile consumers. Currently, Vodafone Idea users in rural and remote areas had to face the problem of weak signal or call drops, while BSNL customers in urban and densely populated areas had to face connectivity issues.
By connecting the networks of both the companies, ‘Roaming like seamless experience’ will be available. When a Vi user passes through a remote village or highway, his phone will instantly connect to the nearest BSNL tower. Similarly, when a BSNL user is in a big city or metro station, he will get data speed and excellent voice clarity from Vi’s strong urban network. This will also stop the process of customers of both the companies switching to other companies through Network Portability (MNP).
Strong rise in stock market: Vodafone Idea touched 52-week high
The news of this mega infrastructure partnership has breathed new life into Vodafone Idea shares on Dalal Street. As soon as the market opened, there was strong buying in the stock and the stock rushed towards the upper circuit of the day. Vodafone Idea shares touched its new 52-week record high on the back of heavy buying.
Market analysts believe that after the relief package and equity conversion by the Central Government, this step will prove to strengthen the fundamentals of the company on the ground. The huge savings arising from network sharing will directly help in improving the company’s cash flow and EBITDA margins. Both institutional and retail investors have viewed this strategic collaboration as a major game-changer for the company’s future.
Necessary steps for survival of 4-player market in telecom sector
The Government of India and the Telecom Regulatory Authority of India (TRAI) have long been advocating the existence of at least four strong players (two private and two public/supported) to maintain healthy competition in the country’s telecom sector. The strengthening of Vi and BSNL was considered very important to prevent any kind of duopoly in the market.
This partnership gives both companies a solid platform to grow their market share and win back lost customers without putting them in any additional financial distress. According to experts, in the coming days this model can also expand to other telecom segments such as enterprise solutions, cloud data connectivity and Internet of Things (IoT) services.