CRISIL believes the credit risk profile of the combined entity will continue to be affected by competition, while the quantum and timeliness of synergy benefits will be key rating sensitivity factors. Moreover, the support provided to the combined entity by its sponsors, Vodafone and ABG, will remain a key monitorable, it added.
The domestic telecom industry is witnessing intense price competition after Reliance Jio Infocomm launched its services. Average revenue per user (ARPU) per month declined to Rs 88 for Voda-Idea for the quarter ended September 30, 2018, from Rs 145 and Rs 132 for Vodafone India and Idea Cellular, respectively, for the corresponding period of the previous fiscal. This led to a significant decline in operating margin of the combined entity to 9.4% during the first six months of fiscal 2019 from 18% in fiscal 2018 on a pro-forma basis.
CRISIL believes Voda-Idea's credit risk profile may be further impacted by continued competition, while the quantum and timeliness of synergy benefits will be key monitorable.
In past six trading days, shares of Vodafone Idea were slipped 20%, as compared to 3% rise in the S&P BSE Sensex. The stock hit a 52-week low of Rs 32.55 on October 8, 2018, on the BSE in intra-day trade.