News: Idea-Vodafone merger officially announced


Idea-Vodafone merger officially announced

The combined entity will create the countrys largest telecom operator with the widest network in the country.
Idea-Vodafone merger officially announced

The much-anticipated merger of Idea Cellular and Vodafone India was announced today, effectively giving birth to the largest network in India, says a report. In a statement the companies said that the merger will create the country’s largest telecom operator with the widest network in the country and pan-India 3G/4G footprint. The following are some of the features that the combined entity will have:

  • Vodafone will own 45% of the entity, and Vodafone and Idea will have the right to nominate 3 directors each.
  • The combined entity will have 40 crore customers – to put things in perspective, nearly one of every three customers in India. 
  • Promoters of idea will have the sole right to appoint Chairman, however, the CEO and COO appointment will need approval of both promoters.
  • The deal excludes Vodafone’s 42% stake in tower company Indus Towers.

The news of the impending merger has been doing rounds for the last few months, and the development comes in soon after Bharti Airtel announced buying Telenor’s operations in six states, and the merger of wireless business of Reliance Communications with Aircel. These disruptions have been attributed to the entry of Reliance Jio in the market, which challenged the players to take on competition. The developments and competition in the telecom industry surely mean that aggressive pricing strategies, mergers and consolidations, and intensive marketing campaigns will become more frequent. 

M&As also augment job cuts. As reported earlier on People Matters, after significant mergers across the industry, the telecom operators are looking forward to streamlining their business operations by identifying and removing redundancies in the sector. Most impacted job cuts would be in sales and distribution department and those in the infrastructure services space. The hiring activity in the industry has also experienced a blow. 

Aircel, a cellular service major announced the termination of its 10% pan-India staff strength i.e. around 700 employees. The move was a part of the first stage manpower downsizing. As per the media reports, these are the first set of redundancies identified by Aircel to reduce the duplication of human resources meanwhile preparing for the possible merger with Reliance Communications (RCom). The company provided around a week's time to its staff members to agree to the company's compensation package which included February’s  full month salary and the basic pay to allotted for next six months. There is a fear in the market that more such jobs cuts will loom the telecom sector in the near future and this can be attributed to consolidation. The situation aroused when the sector was thrown open to the non-state companies in 1995.

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Topics: Technology, #MergersAndAcquisitions

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