MUMBAI|KOLKATA: Vodafone Plc CEO Vittorio Colao arrives in Mumbai this week amid heightened expectations of the announcement of a merger between the Indian unit of one of the world’s largest telecom service operator and Idea Cellular, during his trip, said several people aware of the matter.
The trip, which comes several months ahead of his traditional September-October annual visit, is aimed at sorting out key issues related to the merger besides bolstering staff morale that’s been undermined by fears of job losses after a union, said the people cited above.
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“There are no real irritants to the merger, which is on track,” said an executive on condition of anonymity.
Both sides are expected to make a formal announcement outlining the broad contours even though they may not specify the exact shareholding structure and other detail
Vodafone is believed to be sticking to its demand for both the CEO and CFO positions in the merged entity, and will be happy with Kumar Mangalam Birla being named chairman.
The CEO chosen to run the entity may be one of Vodafone Plc’s global executives, said two of the people cited above. A third said the hunt for a top-level recruit has already been initiated. This could not be independently verified by ET. Spokespersons for Vodafone Plc and the Aditya Birla group, of which Idea is a part, did not respond to ET’s questions.
At a meeting on March 16, top Vodafone executives reviewed the progress of merger-related due-diligence and valuations of the merging entities based on which a possible ownership structure of the combined entity will be formalised. Among those attending was Vivek Badrinath, Vodafone’s CEO for Africa, Middle East, Asia-Pacific.
Operational integration, combined infrastructure, identifiable overlaps/redundancies and the way forward, especially the potential regulatory hurdles associated with spectrum caps, were also discussed.
Analysts reckon there could be a potential overlap of some sites in the event of a merger. “People within Vodafone feel like the parent is hanging up its boots and we will be left at the mercy of Idea management,” said a mid-level Vodafone executive.
The company has put expansion on hold until it was clear how the merger talks would turn out, said company executives.
estimated that more than 100,000 jobs could be lost across the sector in the wake of consolidation that’s taking hold among service providers and infrastructure companies.
Meanwhile, Vodafone has shelved its annual offsite, which is usually finalised at beginning of March and takes place at April end . Some brand and marketing spends are also on hold, said another official.
Earlier this year, Vodafone India rejigged reporting structure of its senior management, bringing them under COO Balesh Sharma. These positions had reported to country CEO.
Significantly, the two companies have decided to share active infrastructure, including wireless equipment. This means any merger will need minimal effort to bring about.
Vodafone and the Aditya Birla group said in January that they were in talks to explore an all-share merger of Vodafone India–excluding Vodafone’s 42% stake in Indus Towers–and Idea. Any merger involving equal rights would be effected through the issue of new shares in Idea to Vodafone and would result in the UKbased parent separating Vodafone India from itself.
The industry is at its weakest ever with a debt burden that of more than Rs 4.5 lakh crore, Gopal Vittal, Bharti Airtel’s managing director for India and South Asia, had said at the ET Telecom India Mobile Congress on Friday. Consolidation should help the big companies left standing to improve their financial viability.
While the Vodafone-Idea merger ratio will be among the key details investors will be looking for in any announcement, the Aditya Birla group is said to be keen to retain at least a 26% stake along with chairmanship of the company for Kumar Mangalam Birla. Vodafone wants to dilute its share to below 50% of the combine, hoping to rekindle its prospects in the Indian market in spite of the troubles it has had since it entered in 2007-08.