Vodafone-Idea merger will mean axe for at least 5,000 staff: report
16 April 2018
The merger process of Vodafone India and Idea Cellular, likely to be completed next month, could see about a fourth of the two telecom firms’ combined 21,000-strong workforce lose jobs in the next few months as the companies look to save on costs, eliminate duplication and improve efficiency, reports The Economic Times citing people familiar with the matter.
Both companies are making losses amid huge revenue pressure and a combined debt of some Rs1,20,000 crore. They have been advised by the nodal team handling the merger to shed at least 5,000 employees in the next couple of months.
“The retrenchment has to happen swiftly because in times of margin pressures in a debt-heavy industry, neither company wants to start new operations burdened with excess manpower,” a senior executive aware of the development told the paper.
The merger, which has received all clearances except from the Department of Telecommunications, is expected to close sometime in May. Sources have told ET that those who fall into the bottom quartile in the performance assessment during this appraisal season will be asked to go and profiles that have a mirror image in the two firms, including in divisions such as supply chain and procurement, will also face the axe as the telcos want to create a cost-efficient merged firm without any flab.
“The numbers may exceed 5,000 since duplication will be in large numbers,” said an industry expert aware of development.
It will be tough for those getting the axe to find jobs within a vastly shrunk telecom industry that has already let go of at least one lakh employees.
While the Aditya Birla Group, which owns Idea Cellular, declined to comment, the diversified conglomerate with operations in cement, retail, textiles and financial services among others has in the past accommodated some of its retrenched employees in other group companies.
Responding to queries from ET, a Vodafone spokesperson said, “This is pure speculation and totally untrue. The two companies have not received final merger approvals and so the leadership teams of Vodafone and Idea continue to compete in the market and manage their businesses separately. No decisions have been taken about the workforce of the merged entity, although it is fair to assume that employees will benefit from the opportunities that arise from working for a significantly larger operation.”
Idea and Vodafone currently employ roughly 11,000 and 10,000-plus people respectively, and analysts have said that a key to the success of the combined entity is their ability to be nimble, expand networks and price their offerings competitively. Cost efficiency will be a key element for the success of the merged entity in a brutally competitive market.
The combined entity will be the largest mobile phone operator in India — replacing Bharti Airtel — with almost 42 per cent customer market share and 37 per cent revenue share.
Last month, the two sides announced the top leadership team of the merged company, to be headed by Balesh Sharma as chief executive officer.
Both telcos are expected to post meek results for the March end quarter. But Idea and Vodafone have sold or are selling their captive towers besides trying to sell their respective 11.5- per cent and 42-per cent stakes in tower company Indus Towers to raise funds.
The Aditya Birla Group has recently infused Rs3,250 crore into Idea, which will also raise a further Rs3,500 crore via a preferential share issue or a rights issue. Correspondingly, Vodafone Group is infusing Rs7,390 crore into its India operations, which along with the Idea fund-raising, will be used to pare debt.