Industry experts believe that both the telco giants might fail to save US$ 2.04 billion as have been planned, after the merge, due to the delay
The delay in Vodafone and Idea merge might cause both the telco giants to lose even more revenues and customers as individual entities due to the disruption of their market shares and delay of expected savings as a single telecom company. Besides these, industry experts have cited that the delay might hamper the operations of the two telcos as well thereby leading to the loss of money and users.
Cost worth US$ 10 billion approx for Vodafone-Idea’s long run, might hold up
Following the merge of Vodafone and Idea, which was originally declared in March 2017, it is expected that the two telcos will save US$ 2.04 billion from the fourth year of its functioning as an entity. For this, the two companies have fixed their net value of operation and future expenditures at US$ 10.5 billion.
However, Vodafone’s debt charges due to one-time spectrum scandal and Idea’s individual debt charges as well – summing up to be more than Rs 11,000 crore, the two telco giants might actually suffer even more revenue losses.
Naveen Kulkarni, telecoms analyst at PhillipCapital, said, “Even a couple of months delay in the merger closure could see the combined entity suffering a 150 basis points (bps) reduction in RMS (revenue market share), which means it stands to lose Rs 600-1,000 crore revenue share for every two-month delay.”
Considering the fierce competition created by Airtel and Reliance Jio in the telecom industry, the delay is only escalating the losses of both Vodafone and Idea. Although both the telco giants own a combined market share of 36 per cent for the financial year 2018, their net data additions is 11 per cent. For Reliance Jio and Airtel, the net data additions is 65 per cent and 24 per cent, respectively – thanks to their successful 4G launches and customer subscriptions.
Kulkarni has also stated that due to poor network quality and go-to-market strategies, Vodafone and Idea will get even more pushed back in the revenue and subscribers’ market by their competitors (Airtel and Reliance Jio) due to the delay in merge.
Cost-cutting might push 21,000 workforce out of jobs
It is also assumed by industry experts that the delay could hinder the human resource management of the companies as well. A lot many employees who will not be a part of the combined entity might be required to be held back indefinitely in order to continue running operations for both the telcos till the merger is finalised and sealed. In fact, Vodafone will be the worst victim because it will not have any existence whatsoever once the merge happens thereby confirming the exit of majority of its employees.
Rohan Dhamija, head of India & Middle East at consulting firm Analysys Mason, said, “Asking people who’ve been fired to stay back indefinitely to meet immediate business-as-usual goals could lead to motivational issues and impact customer facing functions such as sales, marketing and customer care that could make customer retention a challenge for both entities, pre-merger.”
