Task cut out for Vodafone Idea as it moves to leverage synergies3 min read . Updated: 02 Oct 2018, 10:28 AM IST
Trimming excess mobile sites, rationalizing workforce key integration challenges facing merged entity
A month after Vodafone India Ltd and Idea Cellular Ltd merged to form India’s largest telecom operator, various integration challenges have emerged ranging from trimming excess mobile sites and rationalising human resources even as both brands continue to fight for market share in an intensely competitive market.
The company has a tough task cut out as it aims to bring operational synergies in a market with strong rivals, Bharti Airtel Ltd and Reliance Jio Infocomm Ltd, and the pressing need to expand 4G network.
Vodafone Idea Ltd, with more than 408 million subscribers and 32% revenue market share, has embarked on an exercise to rationalise overlapping mobile sites out of total 270,000 sites as of end-June 2018.
“You cannot be running both networks. The equipment is from different vendors. In any given geography, they will have to decide which is the primary vendor. One network will shut down but the sites that you need have to be aligned to the other network. And base stations have to be made similar...This process could take up to six months," a person familiar with the matter said.
The company has already sent notices to Bharti Infratel and Indus Towers for exit of 27,447 colocations which refers to using one structure to deploy antennas belonging to more than one operator at a single location.
When the merger was completed on 31 August, Vodafone Idea said it will be able to generate annual synergies of ₹ 140 billion.
The first round of savings will come from scrapping duplication of towers and equipment, for which talks have been held with network partners.
“Consultations with the company have been happening for the last three months now. We are awaiting a final decision by the company on how to go about the rationalisation plan. As of now, vendors have no clarity on what is the final process to rationalise networks," a second person said, requesting anonymity.
The other segment where Vodafone Idea needs to cut costs is in human resources. At the time of announcement of the merger in March 2017, Vodafone India had 13,187 employees and Idea had 11,784, taking the total count to 24,971 employees.
Vodafone India and Bharti Airtel had 11,086 employees and 17,623 employees respectively as of 31 March 2018. Idea’s staff strength was not available.
“Some employees have been asked to take salary cuts. A lot of transfers are also happening. Employees are also being given an option to move to a different circle at the same designation," said a third person who too requested anonymity.
When contacted, Vodafone Idea denied its employees are being asked to take salary cuts. “As we have repeatedly stated, all appointments are being made on the basis of ‘best person for the job’ principle using a fair, equitable and transparent process of selection," the company said.
A former top executive of Vodafone India said however that “sometimes companies use transfers as a tool to let people go."
“The reality is that a lot of people will be redundant in the company. For example, you don’t need two circle heads for a circle...but the more important task in front of the company is to find its own secret sauce. The senior leadership needs to articulate a vision as the largest telco...what is the strength that the company wants to play to," the executive said, requesting anonymity.
Vodafone Idea has decided to keep both brands as it believes they have strong consumer affinity across markets. This strategy is beneficial for not losing market share but comes with its own challenges.
“How long will two brands survive. How will the retailer have clarity on which sim card to push to a customer. What is the value proposition of the two brands in each circle," the executive cited above said, adding “the company’s branding cocktail can’t be a national one; it will have to be on a market to market basis".
The company will also have to decide the long-term brand strategy, apart from rationalising pricing plans quickly so that there is no arbitrage between the two brands. This is also crucial as Bharti Airtel and Reliance Jio continue to outpace it in 4G coverage. For boosting 4G, huge sums of money will have to be pumped into expanding the network, which inarguably would be Vodafone Idea’s biggest challenge.