Vodafone-Idea Cellular merger: New entity to be competitive, says Nick Read

This will most likely be the last visit to India for Vittorio Colao as the Vodafone Group CEO as he prepares to pass on the baton to Read

A day after the Department of Telecommunications' (DoT's) conditional approval for the Vodafone India-Idea Cellular merger, top executives of the UK-based telecom giant said on Tuesday the merged entity would remain competitive in the Indian market.

Vodafone Group CEO Vittorio Colao and CEO-designate Nick Read met Telecom Minister Manoj Sinha as well as Secretary Aruna Sundararajan. After the meetings, Read said they were happy to receive the letter and that the company would remain competitive after its merger with Idea Cellular.

Vodafone and Idea Cellular though cannot operate as one company till they pay more than Rs 72 billion to the government as one-time spectrum charges. Asked if the company would pay up or challenge the demand, both Read and Colao did not comment. However, when asked if the new entity would be in place under his tenure, Colao said, “Yes. I am optimistic.”

This will most likely be the last visit to India for Colao as Vodafone Group CEO as he prepares to pass on the baton to Read. The charismatic CEO of Vodafone Group, who is on a three-day visit to India along with Read, is set to hand over the operations of the group to Read on July 22, people aware of the details said. Colao will, however, remain with the company till October to enable a smooth transition.

The Vodafone India team is set to give Colao a farewell on Wednesday while introducing Read to everybody.

Vodafone CEO Vittorio Colao

When asked about plans of the UK telecom major after the new entity comes into force, Read said Vodafone had always been a strong investor in India and it would remain that. 

The merger of Vodafone and Idea Cellular would create a telecom behemoth in a highly competitive market, where Bharti Airtel is the current leader and the latest entrant Reliance Jio is the disruptor. The merged entity, to be called Vodafone Idea, will have around 433 million subscribers, and a revenue market share of around 37 per cent. 

As part of the merger deal, Vodafone will own a 45.1 stake in the combined entity, while the Kumar Mangalam Birla-led Aditya Birla Group will have 26 per cent and Idea shareholders 28.9 per cent. The Aditya Birla Group has the right to acquire up to a 9.5 per cent additional stake from Vodafone under an agreed mechanism with a view to equalising the shareholdings over time. 

Debt-ridden firms Idea and Vodafone India are in process of merging their businesses in India as it is expected to bring down cost of their operations and give them relief from cut-throat competition in the market. 

The two companies had earlier this year announced a restructuring of the leadership team for the merged business that will have Kumar Mangalam Birla at the helm as non-executive chairman. Vodafone insider and current Chief Operating Officer (India) Balesh Sharma will be chief executive officer (CEO) of the merged entity.