Vodafone India's plans to go for its maiden public issue to raise around $2 - $2. 5 billion can adversely impact incumbents especially as operators seek additional spectrum in the upcoming auctions for both 4G services and voice telephony, Macquarie has said in a report.
"India's telco (telecom sector) sector is in a state of flux as the shift from 2G/3G to 4G gains momentum, " the investment banking firm said adding that the offer from Vodafone India that could potentially be India's largest after that of coal India, will be watched closely.
"The upcoming launch of Reliance Jio is likely to raise competitive intensity manifold, as India is arguably the last available growth market of this scale for data consumption.
M&A (merger and acquisition) activity has sped up as a result, " it said.
The reference was to incumbents Bharti and Reliance Communications on a spectrum - buying spree.
"We downgraded Bharti and Idea to neutral last week, in view of the stocks' recent recent run - up, lack of positive triggers and concerns over upcoming 700 MHz spectrum auction, " it said and felt Vodafone's plans may add some more to the downside risks.
"We prefer Bharti to Idea. "
At the same time, the leading investment banker said in line with the telecom industry, Vodafone India's average revenue per user has been declining, driven by weaker pricing and the thrust to grow volumes to capture the country's smartphone adoption boom.
"The IPO (initial public offer) has been in the pipeline for many years, and even recent reports pegged it for mid - 2017.
However, Vodafone may be accelerating it as next year could see maximum competition due to a phased launch of RJio over the second half of this 2016. "