“Management expects all approvals for the merger to come in by March/April 2018,” Bank of America-Merrill Lynch said in a note, citing its recent meeting with the Idea Cellular leadership. ET has seen a copy of this note.

Vodafone India and Kumar Birla-led Idea, the country’s second and third-largest telcos, are merging their businesses to create India’s biggest phone company with over 400 million customers. Court and telecom department (DoT) approvals for the merger are pending, with the anti-trust body having cleared it already.

The merger is crucial for both telcos who have been struggling individually to take on new entrant Reliance Jio, losing subscribers and slumping to losses.

But the merged entity is set to initially ring in Rs 2,700 crore (about $415 million) of cost savings by halving tenancies in some 70,000-odd overlapping sites where both telcos have the same 2G gear. The merged entity, however, would have to pay exit penalties for this, although this would be classified into a “one-time dis-synergy line item that would come below operating income” or Ebitda.

“While the management is guiding for a total savings of $10 billion after integration costs and spectrum liberalization payments, we estimate total synergy benefits of $7 billion in our merged entity estimates,” the brokerage said.

Bulk of the cost savings, the US brokerage house said, would come in the second year, post-merger completion, once the Idea-Vodafone combined entity removes overlapping 3G and 4G network gear that would result in sizeable power savings. The overall magnitude of cost benefits, it said, would hinge “on where the spectrum is contiguous or non-contiguous”.

Analysts also expect the merged entity to start freeing up their 2G and 3G airwaves in the 1800 Mhz and 2100 Mhz bands respectively for 4G deployment to be in a position to launch VoLTE-based 4G services in FY19, which would enable voice traffic to be moved from 2G to a mix of 3G/4G spectrum.

In fact, the US brokerage does not expect the Idea-Vodafone merged entity to invest in expensive 4G spectrum in the 700 MHz band for the next couple of years, saying it is likely to focus on refarming existing 2G/3G spectrum holdings to 4G. More so, since spectrum supply is higher than demand in a telecom sector that is rapidly consolidating down to three strong players, following the massive market disruption caused by Jio’s launch of 4G services a little over a year ago.

The likelihood of 700 MHz purchases after two years, it said, would hinge on “the balance sheet strength (of the merged entity) and if competitors like Jio/Bharti have purchased such spectrum”.

But in the run-up to the merger, the US brokerage house said both Idea and Vodafone on a standalone basis remained “vulnerable to market share losses,” despite their recent active infrastructure sharing pact, especially since rivals Bharti Airtel and Reliance Jio Infocomm are more aggressive in terms of capex deployment and customer acquisitions.

It added that any material delay in the merger closure would make both telcos more vulnerable to market share losses.

Unlike Airtel and Jio, Idea and Vodafone are not keen to make heavy investments in the interim, given their highly geared balance sheets, the US brokerage house said.