Airtel the biggest gainer if Vodafone idea goes down the insolvency route.

Kumar Mangalam Birla the chairman of Vodafone –idea announced that the joint venture has no other option other than to shut down if the government doesn’t provide any relief measure on the AGR (adjusted gross revenue) liability of Rs. 44150crore imposed on it by the Supreme Court.

On October 24 the supreme court upheld the governments wider definition of AGR  ( to pay out higher sums towards license fee and spectrum usage fee ) has resulted in greater loss for all major telecom operators to a whopping 1.3 lakh crore penalty.

For the September quarter Vodafone idea reported a record loss of Rs. 50,921 crore following  the wider definition of AGR by the supreme court.  The company chairman Kumar Mangalam Birla has publicly announced its greater probability to go into insolvency if the government doesn’t take an action in favor to the telecom operators.  

Bharti airtel, is expected to be the biggest gainer if Vodafone idea closes down.

Vodafone idea has currently got 311 million customers of which 7.3 % are post paid subscribers.
20 % of its total revenue is generated from these postpaid customers.  If in case Vodafone idea shuts down, all the postpaid customers are more likely to shift to airtel services as Jio doesn’t provide any comprehensive postpaid offerings  and plays widely on prepaid market. This shift will definitely help airtel to raise its ARPU (average revenue per user).

Secondly the reliability of airtel allowing its customers to shift easily to airtel services without changing handsets and even sim cards (porting of sim cards) can definitely attract more Vodafone idea customers. As per data’s most of the idea Vodafone customers uses 2G phones and use less data i.e. out of 200 million 2G customers only 38 million uses data.   Airtel allows these customers to shift to their services (airtel) through porting.  On the contrary jio only has 4G networks. The raise in tariffs from 15 % to 40 % will further restrict the user or customer to upgrade to a 4G service.

Thirdly airtel being a vibrant enterprise business with more experience and diversified and large client base will definitely be able to attract  the idea Vodafone customers  easily  towards them . On the other hand jio being a new player and a recently launched enterprise may find it hard to attract as much customers as that of airtel.

Considering all these factors airtel is expected to get 150 million additional customers which will help the telecom reach a subscriber base of over 429 million. The ARPU is also expected to raise to Rs. 200 in a few quarters and then to Rs. 300 by the addition of more postpaid customers accompanied with hike in tariffs.