Vodafone Idea Ltd
NSE:IDEA
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Good afternoon, ladies and gentlemen. This is Margaret, the moderator for your conference call. Welcome to the Idea Cellular conference. [Operator Instructions]We have with us today Mr. Himanshu Kapania, Managing Director of Idea Cellular; and Mr. Akshaya Moondra, Whole-time Director and Chief Financial Officer of Idea Cellular; along with other key members of the senior management on this call.I want to thank the management team on behalf of all of the participants for taking valuable time to be with us.Given that the senior management is on this conference call, participants are requested to focus on the key strategic and important questions to make sure that we make good use of the senior management's time.I must remind you that the discussion from today's call may include certain forward-looking statements and may -- and must be viewed, therefore, in conjunction with the risks that the company faces.With this, I hand the conference call over to Mr. Himanshu Kapania. Thank you, and over to you, sir.
Thank you, Margaret. On behalf of Idea, I welcome all participants to this earnings call. On 28th April 2018, our Board of Directors adopted the audited results for the fourth quarter and full financial year 2017-'18. The detailed press release, quarterly report and company results have been uploaded on our website, and I assume you had a chance to go through the same.Idea is gearing itself to conclude the last leg of regulatory approval and the remaining activities for merger with Vodafone India's mobility assets. The new leadership team for the merged entity has already been announced on 22nd March 2018 and will take charge with effect from merger transaction completion date. This is possibly my final earnings call. I have thoroughly enjoyed my interactions with all the institution, investors and telecom analysts during the last 7 years and wish all of you happy investing in future.My opening remarks will cover the key developments in the mobile sector during the last financial year FY '18 and how Idea Cellular is gearing itself to operate in the new paradigm, while Mr. Akshaya Moondra, the company's CFO, will provide details on Idea's financial performance for the fourth quarter as well as the full financial year 2017-'18.First, the Indian mobile industry witnessed significant structural changes in FY '18. The Indian mobile industry saw increase in hypercompetitive intensity in FY '18 following significant disruption in telecom sector post entry of the new 4G mobile operator in September 2016. The super aggressive price plans, including the deep discounted unlimited voice bundled data plan offered by most of the incumbent operators to retain existing subscribers in response to below cost abysmally low-priced tariff plans of new operator resulted in explosive growth of voice and data volume, but the sharp drop in mobile services' rate realization and subsequent decline in customer ARPU has led to an unprecedented steep decline in industry revenue in FY '18.Paradoxically, therefore, the industry is in an unsustainable revenue and customer ARPU decline period, unnatural voice and mobile data volume explosion and front-loaded high investment fees, especially for wireless broadband coverage and capacity, content and new digital technologies. These sustained rate pressure along with TRAI led regulatory headwinds has deteriorated industry's financial health forcing at least 5 subscale mobile operators to exit or consolidate and others to merge or monetize nonmobility assets.As per TRAI release, the adjusted gross revenue, AGR, of the industry fell in the calendar year 2017 by INR 322 billion, that is 21.7% against CY '16 AGR revenue. In comparison to the top 3 industry operators, excluding the new entrant, Idea benchmark AGR and subscriber VLR market share showed resilience.Number one, Idea AGR revenue market share declined from 20% in calendar year '16 to 19.5% in calendar year '17, the lowest fall of 0.6% among the top 3 operators in spite of new 4G operator reporting positive AGR revenue at the rate of 6.4% in the last 2 quarters of calendar year '17.Number two, Idea improved its subscriber VLR market share between February 2017 and February 2018 by 1.5% to 20.9% in spite of new operator garnering 15.5% of industry VLR share as per TRAI release.Some of the key structural changes that impacted mobile industry in FY '18 are: A, regulatory environment worsened in FY '18. Effective 1st October 2017, TRAI amended the domestic interconnection usage charge, known as IUC settlement regulation, reducing the mobile termination charge, MTC, from INR 0.14 to INR 0.06 per minute, aggravating the financial stress of the industry.TRAI also amended the international mobile termination settlement charges effective 1st February 2018 from INR 0.53 to INR 0.30 per minute. Cumulatively, both these interconnect regulations have negatively impacted Idea's revenue and EBITDA for FY '18 by INR 18.45 billion and INR 5.29 billion, respectively.Combined domestic and international MTC downward revisions remained a body blow to most operators and reduced investable funds for the critical Digital India program.B, deep discounted unlimited plans are becoming the new norm. The introduction of deep discounted unlimited voice bundled data plans by most mobile operators during FY '18 have been extremely well received by the Indian mobile users.Over the last year, the price of monthly unlimited voice plans bundled with data at high levels of 1.4 to 2 gigabytes per -- a day has fallen from April 2017 levels of INR 300 to INR 165 or lower for 28 days net of taxes effective January 2018.Based on our internal estimates, India has over 400 million consumers as of March 2018 and who have chosen 1 of the top 4 mobile operators' bundled unlimited plan offering. Within a year of its launch, nearly 35% of Indian mobile users have migrated to unlimited bundled voice and data plans. With increasing popularity of these plans, we estimate within the next few quarters, nearly 50% of the 1.1 billion SIM users of Indian mobile services will migrate to such unlimited usage plans.Following mass-market adoption of these eat as much as you can bundled plans, the consumption habits of the Indian mobility users have now undergone a mix shift with marked higher per subscriber usage. Industry voice usage per subscriber has increased 40% on Y-on-Y basis in FY '18. The voice usage per subscriber for Idea has risen sharply to 577 minutes in quarter 4 FY '18 from 412 minutes in quarter 4 FY '17. Similarly, broadband mobile data usage per subscriber for the company has seen a meteoric growth to 7 gigabytes per month in quarter 4 FY '18 compared to 1.4 gigabytes per month a year back.C, unlimited plans driving exponential volume expansion. The adoption of unlimited bundled plan has led to an explosion in voice volumes with Idea's highest-ever sequential quarterly voice minute growth at the rate of 16.9% in quarter 4 FY '18 on top of 10.8% growth in quarter 3 FY '18. The mobile data volume also witnessed robust sequential growth of 43.2% as Idea's pan India wireless data network carried 818 billion megabytes of data volume this quarter, more than 6 times the mobile data volumes compared to 1 year back volume of 127 billion megabytes in quarter 4 FY '17.However, such unlimited plans continued to erode wireless voice and data realization as the voice rates, including the impact of reduction in IUC rates, sharply declined by an unbelievable level of 48% from INR 25.9 per minute in quarter 4 FY '17 to current levels of INR 13.4 per minute.The impact on mobile data realization rate was even higher. Idea's mobile data realization also fell to less than 1/10 level at world's lowest data tariff rate from INR 11.5 per MB in quarter 4 FY '17 to INR 1.4 per megabyte in quarter 4 FY '18.The steep fall in overall rate realization has led to overall consumer ARPU downgrading from INR 142 in quarter 4 FY '17 to INR 105 in quarter 4 FY '18. While today the same customer enjoys 40% more voice volume and 6.3 times data volume, a position clearly unsustainable in the future.Second, positive underlying trends paved the way for brighter FY '19. While industry has remained in tremendous financial stress in FY '18, we remain cautiously optimistic as falling underlying trends resist encouraging long-term prospects for the surviving operators. A, industry witnessed faster-than-expected consolidation in FY '18. Significant financial pressure over last 18 months have forced at least 5 subscale operators to exit or combine with other operators. Charging of pulses by Jio albeit at a very low-price bundles has also prompted number of multi-SIM subscribers to choose amongst operators, further exerting pressure on fringe players.Multiple operators, such as Videocon, Tatas, RCom and MPS have shut down their network, while Aircel has filed for bankruptcy in February 2018. Telenor is waiting for its final approval for merger with Bharti Airtel, which is expected shortly.Idea witnessed a strong return of subscriber addition, with 12.2 million net customer adds on VLR in H2 FY '18 supported by the launch of competitive mark-to-market voice bundled data plan, gaining subscriber share from the exiting operators. The company's overall subscriber VLR stands at 208 million as on 31st March 2018.B, unlimited bundle plans leading to further SIM consolidation, which is expected to boost future ARPU trends. Unlimited bundled plans are paving the way for the second phase of SIM consolidation as consumers who earlier used to split the usage on multiple SIMs are now committing all the usage to a single SIM after opting for a fixed period unlimited voice with data plans. As the initial adopters of these plans were primarily from Idea's high ARPU base, Idea's ARPU for the full year dropped from INR 162 in FY '17 to INR 123 in FY '18 and in quarter 4 FY '18 was at even low level of INR 105. We are, however, confident that subsequent takers of unlimited plans from existing Idea consumer will be value-accretive as casual and multi-SIM consumers begin to commit larger spends to the company on the bundled plan.To focus on driving improvement in ARPU, Idea's strategy continues to be: one, building a company-wide culture of selling unlimited voice and bundled data plans; two, promoting the attractive postpaid Nirvana plan with feature-rich postpaid portfolio such as data rollover, free Idea phone security, et cetera, besides unlimited voice bundled with mobile data; three, targeting low and lower-incoming customers who are currently in nonunlimited category with aim to upgrade these customers at least to the 25 to 150 ARPU level through a series of tariff and product interventions.C, accelerated broadband penetration provide tremendous long-term opportunity. During FY '18, industry broadband coverage has improved multifold, and top 4 companies' 4G services have become increasingly affordable for the masses with tariffs declining from INR 150 a year back to current levels of INR 14 to INR 15 per gigabyte. As a result, India has an impressive addition of 127 million broadband users in the calendar year 2017.Idea also witnessed record broadband subscriber addition of 15 million this year, improving the overall company wireless broadband penetration from 13% in FY '17 to 20.5% in FY '18. Idea's wireless broadband subscriber base now stands at 39.8 million out of the total 46.8 million mobile data users as of 31st March 2018.The country is poised to add another 400 million to 500 million wireless broadband users in next 3 to 4 years, as proportion of 4G smartphones continue to rise and device affordability further improves.Idea continues to gain its fair share in the 4G device upgrades and now has nearly 67 million 4G devices on its network, which provides it a significant revenue opportunity as we encourage our existing customers to move Idea SIM to first lot. Idea is working closely in partnership with the 4G device manufacturers and its ecosystem to further improve smartphone penetration, including tie-ups with e-commerce companies such as Amazon and Flipkart, and partnership with important brands like OPPO, Vivo, Gionee, Motorola, et cetera, for sale of Idea 4G SIM with their new 4G handset models.Two, cashback offers on a range of entry-level 4G smartphone from Karbonn, Sansui, Xiaomi, et cetera, priced at less than INR 5,000 provided customers speed and continuously uses Idea's network over next 2 to 3 years.In February 2018, Idea introduced country's most attractive 4G smartphone cashback offer of INR 2,000. This scheme is available for all existing and new customers till 30th April who upgrade their existing phones to any 4G smartphone, irrespective of the brand and model of the phone. The customer only needs to ensure INR 199 or above plan recharged per month over 36 months to avail the new handset-linked cashback benefit.Nearly 3 million new 4G smartphones are being added to Idea's network every month. Idea's customers with broadband handsets either on 3G or 4G has now risen to 111 million as of March 2018.Moving to the third point. New subscriber growth after SIM consolidation. While existing customers consolidate their multi SIM, nearly 300 million to 400 million Indians who currently do not use any mobile services are at an inflection point to enter the voice category's family on 2G network aided by lowest-ever consumer tariffs and availability of 2G feature phones for as low as INR 300 to INR 500 per handsets.Idea and Vodafone India combined will have the deepest 2G network presence, covering an expanse of over 1.1 billion Indians across 500,000 towns and villages and is best positioned to be the biggest beneficiary of this voice growth post merger. The merged entity has 2G voice coverage and capacity of over 270,000 GSM sites, far in pace with the current market leader, even after adjusting for overlaps between Idea and Vodafone.We're on to the fourth point. Massive investments continue in broadband infrastructure to support the exploding data demand. During FY '18, Idea continued aggressive expansion of its wireless broadband infrastructure, adding 44,856 broadband sites in the year. The broadband sites increased from 110,054 sites as of March 31, 2017, to 154,910 sites as of March 31, 2018, taking the overall network footprint on EoP to 286,356 sites, including GSM, 3G and 4G technology sites counted together.This quarter, Idea also integrated 11,345 broadband sites, including TDD capacity sites on 2,300 and 2,500 megahertz spectrum bands in leadership markets of Maharashtra, Kerala and Andhra Pradesh to further augment its wireless data capacity.Idea's wireless broadband population under coverage now expands beyond 650 million Indians spread over 164,000 town and villages across all the 22 service areas, which will expand definitely post merger as overlapping 3G and 4G sites will be redeployed.Idea also launched voice over LTE, VoLTE, services for employees in select circles recently. The company intends to launch its VoLTE services for Idea customers from May 2018 in a phased manner pan India. The proposed merged entity of Vodafone and Idea already have an installed broadband network equipment base of over 300,000 sites, and post merger, intend to move fast to expand the merged entity coverage from present 750 million broadband coverage to over 1 billion Indian's population high-speed data services pan India by relocating overlapping 3G and 4G sites into noncovered areas. The combined entity already has mobile data capacity of nearly 23 petabyte per day and will build on from present level higher capacity on the power of spectrum consolidation, using nearly 170 broadband carriers and existing overlapping 3G and 4G as well as new 4G broadband equipment.In the interim, both the entities have entered into active infrastructure sharing arrangements to utilize each of the spectrum and build capacity in high-demand areas. Besides active infrastructure sharing program, both companies have entered into 4G ICR arrangements and expanded scope of 2G ICR arrangements to offer services across a large number of new towns and neighboring villages, where one of the operators previously did not have presence.On overall basis, the combined entity is already sharing 49,000 sites either under 4G ICR or 2G ICR or active infrastructure sharing arrangement.The overall Idea's CapEx spends for the financial year 2017-'18 stands at nearly INR 70 billion, in line with our guidance.As the company is in transition -- as merger expected to be completed in H1 CY '18, Idea will not be able to provide full year's CapEx guidance. In the interim, the company will maintain recent quarter's CapEx run rate for quarter 1 FY '19.We're on to the fifth point. Idea is transforming from pure-play mobile operator into integrated digital service provider. Digital Idea launched in January 2017 has now completed more than a year and offers exciting suite of mobile apps and services, such as Idea Music, Idea Movies & TV, Idea Games, Idea News & Magazine, along with self-help My Idea App. Idea successfully onboarded subscriber digitally for self-help on the My Idea App with over 33 million of the present subscribers using the digital app services. This is the topmost rated mobile app amongst all telecom utility apps with 4.8 rating on the iOS store and 4.3 rating on Google Play Store.The company has entered into deep relationship with strong content owners for powering of products, such as with Sony Music, Zee Entertainment, Universal Music, Hungama, Saregama for music and with Eros Now, Ditto TV, YuppTV, Discovery for movies and live TV content amongst others.The Idea Music app constantly appears amongst the top-rank apps on the Play Store. The app offers a rich library of nearly 3.5 million tracks.Our award-winning Idea Movies and TV app offers 400-plus live TV channels and it's seeing strong increase in consumption in regional and vernacular genres. The Idea app offers an assortment of over 8,000 movies across Bollywood, regional and international films and the app has over 75,000 pieces of content for our customers to watch.At strong 4.4 rating, it has been amongst the top rated apps on the Android Play Store. In a short span of 1 year, nearly 18 million of company subscribers are today enjoying Idea Digital content services.Sixth. Merger of Idea and Vodafone India is in final stage of completion. Idea and Vodafone India merger is in final stages of regulatory approval, especially designated teams across network, IT, marketing, sales, service, commercial, finance, human resources, regulatory, et cetera, from both the company within the framework of law are presently working extensively preparing for the day 0 of the merged entity. Both the companies are committed to deliver a guided CapEx and OpEx synergy. Detailed synergy planning is progressing well and granular details are currently being worked out with focus towards achieving faster OpEx, synergy realization than originally planned. CapEx synergy is also being addressed to evaluate the quantum of overlapping equipments, especially on 3G and 4G technologies and identify 2G equipments upgradable to 4G. Work on realizing network fiber synergy has started with first leg expected to be completed for the bandwidth-hungry and critical top 220 cities across 22 circles by September 2018.As already mentioned, from day 0, the benefits of coverage expansion and capacity upgradation for spectrum consolidation could accrue quickly through the merged entity, which should help accelerate subscriber updates, revenue and superior customer experience. As already shared, post completion of merger, Idea and Vodafone India shall own amongst the largest spectrum block of 18 and 15 megahertz with nearly 170 broadband carriers, including spectrum refarming in the efficient 900-megahertz band. Both the companies are seriously contemplating post-merger introduction of 4G services on 900-megahertz in 12 to 15 of its leadership telecom circles to improve indoor 4G and VoLTE consumer experience.Separately, during the last quarter, Indian government, through the central government cabinet, approved the falling telecom benefits based on interministerial group recommendation to partially address financial stress in the sector, including, A, restructure of spectrum deferred payment liability. The existing mobile operators can now avail the option to increase the deferred spectrum payment installment period from earlier 10 to 16 years, providing interim cash flow relief. Idea has opted for a longer credit period.B, revision of spectrum caps. Overall spectrum cap quantum holding for operator has been revised from 25% to 35% and intra-band cap restriction has been removed and instead a new cap of 50% applicable only for the entire range of sub-1 gigahertz band across full spectrum bands of 700, 800, 900-megahertz introduced. As a result, merged entity of Idea and Vodafone India will not have to surrender any spectrum as was required earlier under the M&A clause. Both these regulatory changes are positive developments for the combined Idea and Vodafone India entity.Lastly, update on fundraising to strengthen Idea's balance sheet. In quarter 4 FY '18, Idea successfully completed equity raising of INR 67.5 billion, which include preferential allotment to promoter Aditya Birla Group for a consideration of INR 32.5 billion and qualified institutional placement, that's QIP, of INR 35 billion. Equity raise of INR 67.5 billion will reduce Idea's net debt and, as a result, Vodafone net debt contribution to merged entity will also be lower by the same amount.The sale of Idea's nearly 10,000 stand-alone towers announced on 13 November 2017 to ATC Telecom Infrastructure Private Limited, that's American Tower, for an enterprise value of INR 40 billion is in last leg of government FDI approval for merger of Idea's tower company ICISL with American Tower. We expect to receive the committed tower company's payee funds in the first half of calendar year '18.On 25th April 2018, Idea, along with its wholly-owned subsidiary ABTL, has entered into a separate financial transaction for its 11.15% stake in Indus Towers with Bharti Infratel, BIL, and other Indus shareholders, including Vodafone and Bharti Airtel for the merger OF Indus with BIL to create the largest tower infrastructure company in the world, excluding China, and offering 163,000 towers pan India to Indian mobile operators. This transaction gives an option to Idea to either, A, sell its 11.15% stake to BIL before the merger for cash based on valuation formula linked to VWAP for Bharti Infratel share during the 60 trading days at the end of Idea's election period, which triggers post completion of all regulatory approvals required for the merger. This currently equals to cash consideration of INR 65 billion or alternatively.B, receive new shares of the enlarged merged entity at an average share ratio of 1,565 shares of Bharti Infratel for every share of Indus Tower amounting to nearly 7.1% stake in a large new merged listed entity.Even in the case, Idea decides to exercise full cash option. Idea will have certain rights in the merged tower company either in perpetuity or for a period of 5 years, which will help us significantly protect the interest of our mobility business, including the most flavored partner status, MFN, for Idea mobility business until perpetuity.Vodafone, the joint venture promoter of the listed mobile business entity, post the completion of Idea Vodafone India merger, will continue to also remain in the joint control, along with Bharti Airtel, of the new enlarged tower entity post Bharti Infratel-Indus mergers.To summarize, the merger of Idea and Vodafone India and various fundraising programs are on track or completed. We expect the new Idea-Vodafone India entity, India's largest mobile operator with more than 400 million customers, to operate as one unit from the second half of calendar year 2018 and emerge as a strong Indian mobile service provider for both voice and broadband services across 2G, 3G and 4G platform.I now hand over to Mr. Akshaya Moondra, Idea's CFO, for details on financial performance for the quarter.
Thanks, Himanshu. A very good afternoon to participants from India and good morning or evening as applicable to overseas participants.We have seen a 5.7% decline in revenue over the previous quarter, out of which 0.8% decline is on account of the change in international incoming call termination rate from INR 0.53 to INR 0.30, and 2.2% is on account of fewer days in the quarter.During the quarter, we continued to see ARPU dilution, which contributed to the balance 2.7% revenue decline.On the OpEx side, we had few one-offs in this quarter, being reversals of approximately INR 2 billion in network expenses and INR 1.4 billion in employee expenses on account of provisions made in the previous quarters in this financial year. There's also INR 1 billion one-off in license fee and SUC charges on account of actualization of certain provisions made in the earlier periods.The EBITDA margin for the quarter thus stands at 23.6% against 18.8% in Q3 FY '18.The depreciation and amortization charge and interest and financing costs net for the quarter are INR 20.9 billion and INR 9.7 billion, respectively. The depreciation has dropped by INR 560 million in this quarter, mainly due to lesser number of days in the fourth quarter. The increase on account of new additions has been largely offset by assets, which have completed their useful life.The interest income is higher during this quarter, mainly due to higher cash balance post equity infusion and interest on certain income tax refunds.The stand-alone PAT loss is INR 10.2 billion in Q4 FY '18 compared to a PAT loss of INR 13.5 billion in Q3 FY '18.CapEx for Q4 FY '18 stands at INR 21.1 billion, taking the overall FY 18 CapEx to INR 70 billion, in line with the CapEx guidance.For the full financial year, revenue and EBITDA for Idea stands at INR 282.8 billion and INR 60.5 billion, respectively, a year-on-year decline of 20.5% and 41%, respectively, on account of continuing price pressure and regulatory changes related to reduction in domestic and international terminal rates.This quarter, Idea successfully completed equity raise of INR 67.5 billion. Resultantly, net debt as of March '18 is lower at INR 523.3 billion as against INR 557.8 billion in December '17.As regards the sale of ICISL, the asset and liability values of ICISL continue to be shown as separate line items as assets or liabilities held for sale, respectively, on either side of the consolidated balance sheet. The gain from the ICISL stake sale will be reflected when the transaction is finally consummated, which is expected to be in this quarter.Lastly, pursuant to merger of IMCSL with ABIPBL, that is the payment's bank, which has been effective in this quarter, the company now holds 49% stake in the payment's bank.With this, I hand over the call back to Margaret and open the floor for questions.
[Operator Instructions] The first question is from the line of Sachin Salgaonkar from Bank of America.
Himanshu, it was indeed a pleasure interacting with you for so many years. Wish you all the best for your future, and Akshay, congrats for your role as a CFO of the combined entity. I have 3 questions. Number one, just wanted to understand about the merger update. Now a few days back, there was a ET article talking about $3 billion of related amounts, related to pending license, fees spectrum usage charge and onetime charges. Just wanted to understand from you guys, have you got any notice regarding that and how you look at it? Point two, on Friday, in the analyst meet, Reliance Industries as Jio mentioned that they may not be the first one to take the tariff high, but if any other operator takes, they are happy to follow it. So just wanted to understand your thoughts on the same. And lastly, about perhaps 6-odd months back, we discussed about potential SIM consolidation kind of a phenomenon happening into the market. By the looks of it, it's not happening. So just wanted to understand from your side how should we look at that?
Thank you, Salgaon -- Sachin, for your good wishes. I will take the question in the same orders that you asked. As the merger update is concerned, first and foremost, the company does not react to speculative news reporting. But what I'm going to give you is a broad update of various demands that industry has. As you are aware, these demand reflect as a part of our continued liability and thus reflect part of continued liabilities of all telecom operators, especially the incumbent telecom operators. The current -- the area of disagreement between Department of Telecommunications and telecom operators are in the area of AGR, as well as in the area of onetime spectrum fees. The definition of what is gross revenue has been under discussion for quite some time. And this recommendation has been given by TDSAT and it is currently under review by the Supreme Court. We have -- at the Idea's concern, we at stay of these demands and currently there is Supreme Court order of no coercive action on any demand until Supreme Court hears the case. So there is a clear protection for us on the AGR matter. And similarly, there is a protection on -- from High Court on the onetime spectrum matter. You will see in our balance sheet all these items will continue to appear as contingent liability. As the part of an M&A guideline, which is a public document, you can see that any demand which has a court protection does not require any coverage in terms of cash to be paid out. So that remains our consistent opinion. The spec fee calculation, we will not be able to comment on. If you are okay with this, I will move to the second part.
So just a follow-up, I mean, given I kind of completely understand your stand, but is there a risk because of that the merger time line may get push forward? I saw in your press release, you guys do expect the merger to close in first half, which is couple of months from now?
So we are -- we have been consistent that we are on track as far as merger is concerned. And there are more administrative issues we have -- just to remind everybody on the call that we have received approval from SEBI, from National Stock Exchange, as well as from Bombay Stock Exchange, we approved from CCI both the NCLT approval for Vodafone India in Bombay and for Idea in Ahmedabad. And now we are waiting for the last leg of approvals, there are broadly 2 legs. One is FDI approval, which security clearances of FDI approvals are received and only there will be administrative work is left out, which we expect to sort out hopefully in the next month. And after that, the licenses of Vodafone will merge into Idea. So we are regularly in touch with government and we see no hesitation or any movement which will delay the merger. It is on track. And you are aware that first M&A approval has already happened from government and there are minor dispute between Telenor and Bharti approval which has come in. So government is moving reasonably fast. These are record events given that the complex mergers of very large company and the time period that we are currently that's happening with the merger is almost at the levels of global standards and very much part of ease of doing business. And we are fairly confident that things are moving as per original guidance. We had mentioned similar guidance and we are on track on the guidance. As regards to your specific comment of new operator, I will repeat what I've mentioned in the last quarterly that Idea is not a price warrior. We continue to give a lot of indications that we're happy to be able to raise prices. Even in my opening speech, I -- we have mentioned about how ARPU of our customers have continued to fallen, even unlimited plans which were sold last year of April of 2017 at about INR 300 has now fallen to a levels of around INR 160 to INR 165, where the volume of data has gone up. And we continue to give indications that we will be happy to be able to raise the prices whenever the #1 operator in the country or the new operator it came to that, we are not price warriors and we give their indication both in the marketplace and within the legal framework indication of the same is available. Just to remind you that even as we speak, our tariffs are at least 15% to 20% higher than new operator tariffs.
So from what I could get it from this, Jio is waiting for an indication, you guys are waiting for an indication, so by the looks of it, the ball is in Bharti's court then?
That's for you to look into it. As far as SIM consolidation is concerned, I mentioned in my note and I've been saying that SIM consolidation process has already kicked in. And if you were to notice, over the last 1 year, only 44 million is the total additions of SIMs that has been reported, which is amongst the lowest that has happened. And out of these 44 million, 88 million worth additions by Jio. And overall industry has lost 44 million. Out of these 44 million, the rest of operators, the top 3, have lost over 125 million SIMs number reporting. And definitely, SIM consolidation is happening. But what is continuously ignored by analysts is that there is 300 million to 400 million Indians who still don't own mobile services, who continues -- who also enter the category. So while SIM consolidation process is happening, so is new customers also entering. So in our assessment, anywhere between 75 million to 80 million customers who are first-time users enter the category. And if we are reporting over the trailing 12 months, the 44 million, there has been at least 30 million to 40 million SIM consolidation. It's a slow process, but the ball has kicked on, and it has happened, especially for operators who have exited. So if you look at the number of SIMs that quarter, MNP to the number of reporting of these operators, the numbers have been not more than 30% to 40% of the numbers that they were reporting or the numbers that were reflecting on the VLR.
The next question is from the line of Manish Adukia from Goldman Sachs.
I have 3. First question is on the balance sheet. And obviously your near-term CapEx requirement, I know you're not guiding to one and your obligation to service spectrum data and interest. How are you thinking about future fund requirements for the business? And what in your view will be the parts to lower the leverage over time? That's the first one. Second, on your SG&A costs, I mean, your absolute number of that continue to trend down. How much runway do you have there? And if industry tariffs remain constant, for example, for the foreseeable future, do you think there's room to expand margins in the near term? And what is the potential there? And my third question is, if you can comment on what's the impact has been if at all, in the recent few months at the lower end of your customer segment, where Jio has been pushing the Jio Phone quite aggressively in the last couple of months, have you seen any impact on let's say ARPU or subscriber addition there? Any comments or color around that would be very helpful.
Thank you, Manish. While I'm going to ask Akshay to talk about both the a and b part, and I'll subsequently cover the c part, I just want to give you a broad brush answer on as far as a is concerned. I don't know if you've done the -- your calculations. The total amount that Idea has selected, and I am talking of the merged entity, once all the announcements are completed, is to an order of USD 4 million. And what is this USD 4 million? It includes INR 67.5 billion that we collected through equity raise both our promoter as well as through IP. If you include INR 78.5 billion raised on account of standalone tower, it includes the announced 11.15% of monetization and include the related amount of money which Vodafone will have to contribute on account of the merger of whatever equity has been brought in by Idea. So that number is now in excess of USD 4 billion closer to USD 4.5 billion when the whole amount is totally calculated. One of the challenges that we are facing is the decline, as summarized by Akshay for FY '18, we had a 41% decline in EBITDA. And the decline in EBITDA is the reason why you see that the balance sheet where the net debt is not increasing, but it is the -- it's a decline in EBITDA, that's why that ratio don't look very healthy. What is going forward, there are 2 big elements that were happened, which it has to be recorded. First is, that our cash requirement is going -- getting pushed into future year. And the reason for that is also a change of IMG recommendations and now approved by the Cabinet from 10 years to 16 years. So for our spectrum, deferred spectrum installments are now being pushed, giving us lot of relief on account of that. So that is one. And second, we are all gearing post-merger for significant amount of synergy with the potential of delivering far more synergy than what we have given guidance. And even if we had to go by the guidance, we are -- potential of $2 billion of synergy which we are targeting to bringing closer to the third year and as much faster as possible. So given all of that, we are not under cash check as debt, yet their ratios don't look very good. But from a cash requirement to the company, we are fully funded or mostly funded for our merger. And we look forward to market repair to happen. So these are broad brush number, I'm going to hand it over to Akshay to be able to give you far more specifics and additional points.
So Manish, actually Himanshu has covered most of point on the balance sheet part. I would just say that in the current context of focuses on managing funding for our investments and we believe we are adequately covered for the medium term. And in terms of the ratios getting corrected, that will happen only as EBITDA improves. And as Himanshu said, that will happen through 2 routes. First is, that synergies, which of course, is not within our control, and that should start happening as soon as the merger is completed. And the second is, on account of market repair, which all of us are expecting should start happening soon. So I think that is the response as far as the balance sheet is concerned. Now on the sales, general and administrative expenses...
Do you have any questions on first, Manish?
Yes, I just wanted to have one follow-up. So I think I mean, I know that you are not giving any CapEx guidance as such. But if you can just broadly give us a sense that for the combined entity, the CapEx that today Idea and Vodafone are spending on their own. For the combined entity, would that number be higher versus that? Or would that be lower versus that in your view?
So I think it's not a straightforward answer. You have to remember that, that we have spent INR 70 billion and Vodafone though doesn't give guidance, it's not a listed company. Our broad understanding is of a similar order. So now, once the merger takes place, there is a very large -- besides OpEx synergy, there is a very large CapEx synergy. And want you to register this, for example, we have 300,000 broadband sites at this point of time. But our coverage, which is far larger than the current leader in the market, but our -- lot of these sites are currently deployed in the same place for both the operators, and that will be reused and/or redeployed into areas where there is no coverage. So secondly, each of us are currently deploying only 600 megahertz [ hardly ] spectrum for broadband, and we are going to deploy in the order of 1,250 to 1,300 megahertz and 170 broadband carriers, which is going to give us a significant exponential growth of capacity. Thirdly, there is fiber. We have independent fibers. And when we combine with a very small additional component, we are able to combine a large portion of our fibers. Fourth, which is not yet talked about but extremely important, we have 270,000 2G sites. Everybody ignore the presence of 270,000 sites. We're doing the calculation, a significant number of these 2G sites are upgradable to 4G sites. A significant number of our 3G sites, which is in excess of 175,000, are upgradable to 4G sites. So there is a significant CapEx synergy that is being calculated, that benefit is going to come to those base. So you cannot compare our CapEx guidance or new CapEx guidance with anybody else who's not -- doesn't have old equipment to be used, to be reused for benefit of expanding coverage and capacities. So that's why you cannot compare our guidance is similar to anybody else's guidance.
Or in other words, if I may put it, even if our CapEx cash spend remains same as what we collectively did in the last year, in terms of capacity creation, we would be creating capacity which is more in line with the market leader's CapEx guidance. So on the SG&A, let me put it like this. Your question is that is there further scope for reducing SG&A and is there further scope for improving margins within a flat tariff structure?
Sure. Yes.
So regarding SG&A, definitely there is scope to improve further, so especially in the context of the merged entity. As we said, there are synergies, largely networks, but there are synergies and other items of cost also, SG&A is one of them. And there are 2 kinds of things which will happen. One is that as just 2 large organizations of businesses come together, there is elimination of duplication and that will result in synergies. And I think those are the synergies which have been kind of quantified and guidance has been given from our side. Besides that, we are also seeing that the business models are evolving. And let's say, there is more and more of recharging on online. There is more and more of e-KYC has been started. So customer verification calls have been kind of reduced. The consolidation is happening in the industry, so we believe that churn levels will continue to go down. All these are also factors which will contribute to the improvement besides the combination of 2 businesses itself. So both within SG&A and other heads of expenses, also you will find these benefits coming in. So definitely, it is possible to expand margins in a flat tariff environment. But if one looks at an industry perspective, probably that is not enough for industry to get decent returns. And so an improvement in tariffs and pricing is also essential.
Okay. So I move to the third part of your question, which is impact on lower end of the customer base. So rather than looking at outside the primary impact of customer basis that we had high ARPU customers earlier, who have downgraded themselves, first in the month of April, when we induced unlimited plan, but at the end, it was on an average of INR 300 for a 20-day plan. And now, in the second round of correction which took place in the month of January of 2018, it is down to INR 165. So which has obviously resulted in a much higher throughput over 25% to 26% of our subscriber base have upgraded themselves to an unlimited plan. And we continue to get very good traction on customer choosing the unlimited plan. So once -- one, there had been downgrading of customers who were on higher end, there's also upgrading of customers from the lower end. And because of upgrading of customers on the lower end, the remaining customers' ARPU has been on the decline phase. So what we are now noticing is earlier multiSIM customers are taking a larger call for themselves, it's not so much only on the handset side, but it's also on customers who are using 2 networks, 1 network for incoming and other network for -- really tariffs of a low-priced operator are on the consolidation mode. So presently, the industry is in a disruptive state. And we are expecting, as I mentioned to Sachin, that there will -- there is a SIM consolidation process which is underway. While SIM consolidation is happening, as we speak today, only about 350 million Indians are currently using broadband services out of 1.1 billion. And 750 million Indians are still or SIM card users are still voice users. And they continue to be on the 2G, mostly on the 2G and to some extent on the 3G network and continue to be with us. The consolidation is happening with the exiting of 5 operators who are more or less exited out of the market. So those customers are entering towards us. And once the customer decides to upgrade himself from pure voice services to voice plus broadband services, he goes around and looking for options, either with us or the remaining 3 in the marketplace. So that is currently what is happening. I hope that did answer your question?
The next question is from the line of Kunal Vora from BNP Paribas.
A couple of questions. First is, your operating metrics this quarter, as well as financial metrics were slightly weaker compared to competition. Any thoughts on -- like any reason for that? And how are you looking to correct that? That's one. Second is, how is your data capacity currently compared to the other 2 operators? And how do you see this number changing over the next 2 years? And what investment would be required for you to get there?
So Kunal, you are absolutely right. To some extent, the financial metrics -- I believe what you're mentioning is as regards to revenue factor and broadband subscribers are lower. One of the reasons is, you are seeing the leader who is aggressively investing. And we, as an entity, are working together focusing ourselves most of our effort to be able to move to as a merged entity. So our focus at this point of time is a combination of outward and inward looking to make sure that there is less of duplication of capital investment and wait for the merger to take place. As a combined entity, we continue to be our metrics whether it is overall data capacity, whether it is overall broadband subscribers, relative to overall subscriber -- VLR growth continuous to be much ahead than as a single entity. And so you will find that post the merger, once we open up and show you all the metrics, you will find how much better off we are in comparison to what market is not able to relate to it. But we are all working towards the gap is small. I believe in the last -- first 6 months, we had weak subscriber growth. Some of the factors also affected revenue-related metrics for us. Last 6 months, we've been able to recover smartly with the addition of 12 -- over 12 million subscribers. We are also trying to be a little more cautious as far as prices is concerned. And so rather than go overboard on subscribers, we are trying to maintain a right judicious mix of prices not trying to be significant price warrior. Some of it can be reflected in the results. But we believe that the distance is -- the gap is small. And we are comfortable at this point of time because we have to make sure that, as a combined entity, we meet all the M&A guidelines. If you're fine with this answer, then I'll move to the second part of your data capacity. Kunal, are you there?
Yes, I am. Like I just have one follow-up question on the first one. As a merged co, how many quarters do you think it will take to stabilize because it looks like your competition is seeing your merger as an opportunity to gain some market share? So by when do you think the merged co will be ready to take on the competition?
So let me put this way then. So these are all figure of speeches is that's all. At this point of time, subscribers, we have not lost. We continue to -- if you look at existing subscribers, if you look at the MNP total of the merged co has been far better than of the top operators, okay. If you look at the additions of unlimited plan, we have been far better than the -- than individuals. So we have been shouting on the rooftop that we are doing better. If you look at one simple metrics, which is calendar year 2017, AGR performance, and you will realize that both us and the merged co has done significantly better than them, and the distance is very, very large. So you have to understand that there are different reporting techniques that somebody has been trying to do, which is obviously on which they are talking about that they will do better. So we don't -- do not expect any losses to be have once the merged co-operates, it is the eye on the market very much. But we are not going to operate as a discount warrior. We will not take subscribers for -- at any cost. That's not the philosophy that are wanting to run. We do not want to bring down more tariff and bring us more losses. That's not the metrics that we are looking at. But we are not losing any AGR market share. We are not going to lose our higher-end subscriber base. And we will continue to offer very good service to the customers. So -- if you were to look at any benchmark report of TRAI, which had been seen in a couple of manner. For example, somebody is getting some subscribers on account of ICR opened for one operator is not the way. Then if you look at normal subscribers, okay, we continue to be extremely competitive. Are you okay with it? I'll answer the second part. As far as data capacity is concerned on a merged co basis, as we mentioned, we have a radio capacity of around 23 petabyte, which is -- and our utilization is lower than this. And we are building as much capacity that we require till that -- till the merger happens. And I have to keep reminding you, post the merger, there is going to be spectrum consolidation, which will give us one big jump in terms of capacity.
Fair enough. How does it compare with the competition? And do you think the gap, like how long do you think it will take you to converge the capacity?
So there are 2 key reminder. We have a 400 million subscriber base. And out of the 400 million subscriber base, only about 25% or little less than 25% of our subscribers are on broadband. So let's go step-by-step. In terms of voice capacity, our -- we have sufficient voice capacity to handle the growth, and we are getting very robust growth on a quarter-on-quarter basis. So both as individual company as well as merged entities, we were able to handle the voice. And now we're introducing VoLTE services, which is going to add to a tremendous growth in terms of overall voice capacity. As far as broadband capacity is concerned, our other focus will be that out of the current equipment that we have, expand the hardwares, overlapping hardware into uncovered area which will add to customers who have got existing broadband devices to be able to use this and to be able to consolidate our spectrum. So which we believe in a period of 2 quarters to 3 quarters, you'll see both the mainframe spectrum consolidation and reuse of broadband equipment. That's where we are expecting post the merger.
Kunal, just wanted to add one thing that I think while we mentioned that on some of the investors sometimes that in the historical sense, we always use to measure market shares on GR, which is the gross revenue. However, the practices of booking captive revenue between circles has gotten different between different operators over a period of time. So in the current scenario, the best way to look at market shares would be to look at AGR and not GR.
And in AGR, you realize that Idea's drop is the lowest.
The next question is from the line of Srinivas Rao from Deutsche Bank.
Himanshu, thank you very much for leading the company for a long time. I think there has been both highs and lows during your tenure and truly transformational, I guess, during that period. I wanted to start with one question first on the penetration of the bundled subscribers or the broadband subscribers. Now you have right now, you said 40 million subscribers versus 111 million smartphones on your network. What -- how quickly can that gap be bridged if the gap of that -- right now those balance 60 million-odd of subscribers are they using your competitors' 4G network? What is your thought process on that? My second question is on the issue, which I think lot of investors have raised, but I think you have adjusted partly which is that the operating outcomes don't show as if the company is constrained for capital. Is that the fair way to think about it? And will -- do you believe your EBITDA will more than cover for whatever will be the CapEx cash requirement in the midterm, which is primarily CapEx and the spectrum payments for the DoT? And thirdly, my question is on the sales structure of the company, which I guess is something which we're really interested in. Any thoughts on how the sales structure of the merged co will be? If you can throw any light at this stage that will be helpful.
You're right, we have broadband subscribers of 40 million and smartphone user device owners at 111 million, so there is a gap. The gap can be explained over 2 areas. One, as we mentioned, we are currently covering about 650 million broadly broadband coverage, while our 2G coverage is nearly 1 billion. So there are 350 million population which gets 2G coverage and does not get 4G coverage. And in those areas, there is a possibility that the customer prefers to use our voice network and use a network of competition. And the second part is just because a owner, a customer owns a smartphone as we have seen, does not mean that he is ready to use mobile broadband. If you look at, country today has only 350 million mobile broadband users and 1.1 billion of SIM cards for -- broadly for -- and the remaining 750 million are voice users. So if I were to split mobile broadband on an overall basis, India has got while 1.1 billion SIMs, in our internal study, our belief is that anywhere between 800 million to 850 million of them own a device and about 250 million to 300 million are the multiSIM users on an overall basis. So there is a large number of them, out of which who are -- who have still got devices. And are out of that 850 million, our belief is that smartphone users or smartphone owners are in the range of about 350 million to 400 million. And the 2G phone are in the range of about 400 million to 450 million. This is a broad brush numbers. So our belief is that the smartphone, whether it is smartphone users or whether it is a 2G phone users, at least over 25% of them are multiSIM users and continue to use multiSIM. So to summarize the point we are making, the device owners are much lower than the SIM users and there is a multiSIM usage, as well as -- but the consolidation process has started to kick in, the device sales have started to increase much faster than the sales of SIMs. And this consolidation benefit you will see in the going forward. The second is, we are -- post the merger, we are expecting our coverage to expand very rapidly because of overlapping equipment that we currently have, will be expand. And once we are able to cover from our -- the gap between where we have only 2G coverage, don't have 4G coverage, these customers should certainly come back to us. And thirdly, there is a large number of customers, even though they own smartphones, they only use voice services and don't use broadband services. And only over a period of time, while a lot more new customers are entering this category, there is still a big gap between customers who only want to use voice and don't want to use data and only over the next 2 to 3 years when this gap will reduce. If you're okay with the question and then I move to the second part. As far as...
I think your next question was relating to, I was not clear, but you said something to do with operating flows and equipped to take care of CapEx and debt servicing. Now currently, I will answer this only in the context of Idea, although we've also been looking at that out of the merged entity due later on. But let's say today, if you look at our EBITDA, and then -- or let's say, let's look at it in the context of merged entity, there is a certain EBITDA and synergies are going to come in. And if you combine the synergies along with the current level of EBITDA that would be adequate to meet the CapEx requirement, which is to be incurred to after taking into account the synergies on account of CapEx itself. In terms of debt servicing, we have restructured our debt and along with the further relief from the government side in terms of restructuring the debt from 10 to 16 years, very roughly, for Idea alone, the principal debt servicing for the next 3 years is only INR 35 billion roughly. The rest of it would be interest servicing, which is separately there. So really speaking from a CapEx and debt servicing perspective, we will have adequate funding from operations. Of course, we also have to fund the interest payments. And to that extent, as we've said that we have raised capital right now that will provide us sufficient buffer to meet any deficit in the medium term. And let's see, ultimately, we do believe that market will recover, which will result in improved EBITDAs from the current levels.
On the sales structure, any thoughts?
Sales structure, I will assume that you are referring to that both the companies have independent distributors that is primarily, our business is prepaid and we have common retailers because the businesses are through multibrand retailers. So your -- our assumption is that your question is about via independent distributors that distributor consolidation is a definite process post the merger. The teams are working together to be able to work out what is the best way that we can consolidate. Whether we will shorten their territory or we will move to a larger distributor common base there, that is the process that will happen. And the sequence of synergy program is as follows. First and foremost, network consolidation. Second is going to be sales consolidation, primarily the distributor consolidation. And third is the brand consolidation. So the teams, both the teams are working together to be able to get this act together. And as we mentioned, repeatedly by us, the synergy that you will see in OpEx is not only in network, which is obviously can be very easily accounted, but also will be seen on non-network elements. And both synergy in form of consolidation of our sales and service network as well consolidation of branch should bring us synergies.
This is really helpful. And Akshay, congratulations on your new role.
Thanks. Thanks, Srini.
The next question is from the line of Sanjay Chawla from JM Financial.
Himanshu, my first question is you mentioned the total mobile broadband coverage for the combined entity as of now. Could you also give us the number of unique mobile broadband sites you have 300,000 BTS I believe on a combined basis? But in terms of unique unduplicated mobile broadband sites, what is the number currently? And as a related question is your mobile broadband additions are quite low, I mean, much lower than peers. Jio has reported 26 million plus, although it includes Jio Phone as well. Bharti has reported 14 million, your number is 5.2 million. So apart from the coverage deficit which may be there, is capacity also an issue that's a related question to that. And the second question is, Akshay, very specific question, the leverage ratio is running quite high at 9x. And so do you anticipate any hurdle in refinancing of the spectrum installment in FY '19 and FY '20, at least the principal component that would -- the refinancing could be an issue given your leverage ratios are already quite high?
We have said in our opening remark that Idea's own coverage is at the level of 650 million and combined entity because of overlapping is currently at the level of 750 million. And Idea's broadband sites are also being shared with you at 150,000 approximately levels. And the combined entity is at the level of 300,000. So there is a large portion of overlapping sites. The exact number, we are not sharing at this point of time. And but we have to -- that's why we have been reemphasizing independently also in this call that there is a lot of overlapping equipment, which will be going to be reused to be able to expand to uncovered areas. And wherever these equipment, overlapping equipment exists, those equipment once we remove that, because of spectrum consolidation, the same equipment will have much larger capacities. If you are okay with it, I'll move to the second part.
Yes, the related part on the -- why the mobile broadband additions are turning out to be lower than peers?
So as we mentioned in the earlier call that there are 2 approaches. There have been very aggressive broadband pricing offered at a lower end for INR 49 and INR 100, INR 99. We have chosen not to participate in both these price plans. So we are currently only participating in the INR 199 and the INR 149. In the levels of INR 99, we are only using segmented offers, primarily to protect our voice customers, not our broadband customers, because we believe that price is unsustainable and that is far below cost. So that is the one reason that we believe to be the reason for broadband subscribers who left. There is no shortage of capacity. We believe this is not the right size to be able to operate an unlimited voice and a fixed broadband data at such low price.
But at this stage of the industry -- sorry.
That's the view we have taken and we have consistently maintained that we are not the price warrior. And we are operating -- for us the central price plan that we are competing is at INR 199, which is open-market price, which bundled voice and bundled data is being offered, which itself -- if you take a net of taxes at a level of INR 160 against earlier offer of INR 300. So we do not want to participate in INR 60 to INR 70 price point with unlimited voice and broadband data of 1 to 2 or 3 GB that being added.
But how difficult or easy it is going to be to get the customer back once the customer has started using the network of other operators?
So we have taken a conscious call and we have not lost any of our high-ARPU customers. So we are conscious in maintaining our high-ARPU customers. At this point of time, in comparisons, we don't see the difference should be large. But we'll take a call, we'll keep a close watch in the market.
On the capacity to clarify...
There is no point in selling below cost, significantly below cost is not the model that we are wanting to participate in.
Himanshu, I just wanted to clarify, if I picked up these data points correctly, you said merged co has 23 petabytes of radio capacity. Is that the number right now?
That's right.
And also you mentioned 175,000 3G BTS on a combined basis. Is that...
Did I mention anything on 3G BTS, I said combined broadband BTS is 300,000. I would stay with that.
Okay. I thought I heard 175,000 for 3G.
Overall broadband compared to 3G plus 4G is 300,000.
Right, okay. Okay. And Akshay, on the second part?
Sanjay, I think on the need for -- there is no need for refinancing at all. As you know that there is cash on our balance sheet today. We will be concluding the tower transaction, which will bring in additional INR 4,000 crores. The Indus stake monetization as and when it happens will bring in additional cash. And as and when the merger happens, then again Vodafone will be also bringing some cash on its balance sheet. So we've done this evaluation and we do not see any need for refinancing in the foreseeable future. We will be able to service our debt out of the funds raised and the operational cash.
I hope you got the message that we have the total cash once all the actions are completed, which we have initiated and some of it has already come, which includes the equity that we've raised of INR 67.5 billion, which includes standalone tower sale of INR 78.5 billion, which includes Indus stake sale of INR 65 billion, and which includes Vodafone counter against Idea's equity raise. All put together, it is far in excess of USD 4 billion. And synergy guidance is USD 2 billion. I hope these -- all these numbers, you have done your calculation on that. And based on this, I don't know how this discussion about -- there is no -- immediate future, there is no need for us to be able to get any installments there because once the 10 years have moved to 16 years.
But I thought the assumption was that the cash which has been raised, that's going to go towards -- along with EBITDA will go towards interest payment and CapEx. I think that you know a portion of that could be used to repay the installments as well?
Sanjay, we are not distinguishing between what is the source and what is the application. We are saying that in totality, the source is available and the source is enough to meet our requirements in the immediate future. So I don't think there is any challenge. I mean we can have a offline discussion, but USD 4 billion plus synergies kicking in is sufficient cash to meet all our requirements. We don't need to refinance anything.
And there is a general belief that over a foreseeable future, the market will repair itself.
All right. Of course. Just a related question, apart from the CapEx investing, how much one should build in with regard to spectrum liberalization charge and the tower-related penalties, which may come in? Are these -- I mean, is the tower -- is the spectrum liberalization charge a must before merger? Or can it be delayed or avoided given there is so much litigation and core protection also around some of the onetime spectrum charge and all those demands? Any thoughts on that?
As we are still in process of discussion, it is not possible for us to give any guidance.
Okay, okay. Just the last question, if I could just squeeze in one. There is obviously a lot of duplicate legacy 2G equipment also of -- for merged entity. Do you anticipate some write-offs on the or it will take depreciation on that ground for especially legacy equipment which for there is simply no more use anymore.
We're not able to hear you properly. Can you...
My question was...
Mr. Sanjay, can you move your mouthpiece a little away from your mouth and speak?
Yes. No, my question was on the legacy 2G equipment. There will be some duplicate legacy 2G equipment as well. Should one build in some writeoffs also on account of that the equipment which simply cannot be used anymore or there is no need to use that?
So let me explain to you. Today if you see that our voice growth is to an order of 35% on a year-on-year basis, and it is not only for Idea, it is also -- our partners are also will be facing similar kind of volume growth. On a combined basis, we have 270,000 2G equipment that we have. A significant portion of these 2G equipments are upgradable. They are multi-technology equipment, which will, over a period of time, be upgraded. And as that capacity reduces, the remaining equipment voice capacity will continue to be utilized. So the capacity reduction of the 2G equipment will be used -- will compensated with introduction of VoLTE by both the company. So in the short run, there is -- we will be using 2G equipment beyond the life of these equipments.
The next question is from the line of Rajiv Sharma from HSBC.
Himanshu, there has been a lot of a value interacting with you for the last several years. And Akshay, many congrats for the new role. Just couple of questions from my side. Himanshu, you've provided lot of color on the issue that you do not want to participate in plans which are below cost. But what happens if the situation changes and subscriber loss starts happening in the lower end? In that case, could we see you trying to close the gap on the INR 98 and the -- at least the INR 98 plan? And secondly, just also wanted to understand that the 2G market is consolidating between you and Bharti, the merged co and Bharti. And there are 100 million or maybe 150 million subscribers on each side, which will be at INR 25 or INR 30 or even lower on monthly revenues. Will there be a scope to get some upsides there on the ARPU, given that the 2G capacities are consolidating? And thirdly, how do you see this whole network piece getting integrated given that there are so many moving parts, you have different vendors, then you have to take out some spectrum and ensure that services are not disrupted. So is it a 6- to 8-quarter process? Or is it a 4- to 6-quarter process? Some light on that.
Thank you. So as far as the INR 49, definitely we are not participating in the INR 49. In the INR 98 business, we are closely watching the situation, there may be some weak markets if there is a need to be able to offer some segmented plan, we may offer. But on a by and large, on an overall basis, we are keeping us away from it. But we are closely observing the market. So we are focusing our attention primarily on INR 149 and INR 199. And to our mind, even if it's a 0.5% less revenue, it is better to be able to have a profitable growth is the current point of view. But we closely watch the situation and we are a very flexible company, but not a price warrior. So in that, we will accordingly adjust ourselves what is necessary. If you look at in terms of minutes growth or data volume growth, we've had a robust growth. But we don't want to participate in far below, below cost plan. So that is the current view. But we'll keep ourselves completely focused on the market. Beyond that, it's very difficult to answer at this point in time. If you're okay with this?
Yes, this is helpful. This is helpful.
As far as 2G market consolidation, yes, 2G market will consolidate, and most of it is coming from exiting operators. You see a lot of subscribers which were reported by operators who are exiting the market, they're only a very small percentage, only 30%, 35% of the overall number has returned back. And there have been fair share of MNP distribution between 3 of us, in line with our market shares. So 2G market will consolidate. After the market has been overall settled, I would expect ARPU -- ARPUs to start going up because customers who are using multiple SIMs will move all the users to one operator. And once that happens, it's natural to expect the ARPU of 2G will also go up who are dominant voice users. And the current plans that are being offered on unlimiteds on voice are extremely attractive, never had such good, even in the best of its time way back in 2010, 2011, prices were never as low as what it is. So it is encouraging a lot of customers who are nonusers to enter the category. It is encouraging lot of customers to stay with single operator. And with the merged entity, having almost 1.6 to 1.7x 2G equipment and a far larger capacities and coverage, we expect to gain the maximum of on 2G consolidation. If you are fine, let me cover the most significant part of the question, which is the network consolidation.
Sure.
So on the network consultation, first and foremost, I want to remind everybody that we, as a company, have been doing network consolidation now for years together. What does it mean? That we have -- whenever we bought 4G spectrum and we had old equipment, we still are able to change equipment supplier, and we have done that in the past, we're able to move one set of equipment to -- from one brand to another brand. And examples of that can be found as well as Idea's concern in Delhi, in which we've completely moved all our existing supplier into the new supplier, both for our 2G as well as 4G. The same has happened in Rajasthan. The same has happened in Bihar. The same has happened as well as Karnataka is concerned. And we've done that also for certain equipment which carry -- which completed full life. For example in Kerala, we carried out this exercise, all old equipment was updated. We had Siemens, even though Siemens consolidated with Nokia, we removed all the equipment of Siemens and did this exercise. On typically this happens over a 6 months to 18 months, depending on the size of the network. And it never disrupts any services of the customer. So we are masters in being able to scrap equipment. And it is not the first time that we are going to do network consolidation. The process of network consolidation are going to be threefold, I'm not giving you any sequence. The first is overlapping equipment in the broadband side, which is 3G, 4G, because we are able to -- most of the equipment that we have is capable to use multi-spectrum. We're -- currently 2 companies are using independent spectrum. The same hardware can now use 2 company's spectrum and the remaining equipment can be moved out from an overlapping site into an uncovered site. So that's the fastest activity that will be carried over the 3G, 4G. Then there is the overlapping equipment on the same tower. Both the companies have same equipment. We will be immediately get OpEx synergies of an order of INR 2 billion -- INR 20 billion on day 1 itself of overlapping sites where both operators are on the same tower. And then we will add new sites once we stop paying for tenancy. The next step will be to start consolidating the spectrum into one, we're building capacity into one of the equipment, which is going to remain back and to be able to move the remaining equipment. Now as far as supplier is concerned, we can do single supplier in newer circle, we can do cluster by cluster program, so all of this is currently under design. And it is not that for the first time we're going to do this, we have done this over the last 4 to 5 years. And on multiple purpose and for a multiple type of technologies and multiple suppliers. So we are very confident to be able to carry out this exercise. And India has mastered this art and it's not that Idea is going to do it for the first time or Vodafone is going to do it for the first time. It will be done by all top telecom operators. And we are very confident that the network consolidation will be a seamless exercise, and which is not going to disturb everybody, disturb any customer at all. And a general sense is, it will take -- our focus will be to highest revenue market will be done first, while the overall activity may take 18 months, 12 to 18 months or closer to 18 months' time period. But highest-revenue generating market will be done first as well as highest reuse equipment will be carried out -- will get the benefit first. But this will -- also offline, we can come over -- sometimes we can come over and explain you in greater detail.
Yes, this is very helpful. Just a small follow-up. So is it fair to assume that most of the CapEx also will be focused on the top 15 circles in the first 12 months?
In 22 circles, we have fairly a large coverage. And obviously, we will focus on wherever we get the maximum bank for our buck. Specific strategy is not being shared, but we will obviously like to maximize our revenues and EBITDA first.
Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Himanshu Kapania for closing comments.
Thank you so much, Margaret. Once again, I would like to thank each of the institutional investors and the telecom analysts. All of you have been -- have worked with -- a lot of -- worked with a lot of detail and plot us great insights, which help us to fine-tune our strategies. I would miss you, but I wish all of you happy investing and continue to be able to support the telecom sector. Thank you so much, and all the very best.
Thank you. On behalf of Idea Cellular Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.