Idea Cellular's progress on 4G rollout has been slower than expected. We understand that Idea has spread its 4G network across circles, which means that its established circles do not have sufficient 4G coverage to prevent subscriber churn to other networks. Spiralling debt burden (interest almost equal to Ebitda in the worst quarters) for Vodafone and Idea would inhibit capex unless there is equity infusion or monetisation through tower sale. Even after the merger is completed, integration issues are likely in the initial stages.
We understand that Idea and Vodafone are committed to infusing equity if certain debt thresholds are breached, as per their agreement. Also that doing capex in haste means losing value after the merger assuming that capacity synergies start to come through over time. Even after the merger is completed, integration issues are likely as Idea/Vodafone have different vendors for 2G, 3G, and 4G in various circles.
