A Voda­fone-Idea Merged En­tity will be ‘Truly Co-man­aged’: Co­lao

Voda chief said to have urged top ex­ecs to ‘leave no stone un­turned in com­bat­ing Jio’ in the run up to the merger

The Economic Times - - Companies: Pursuit Of Profit - Kalyan.Par­bat @times­group.com

Kolkata: Voda­fone Group chief ex­ec­u­tive Vit­to­rio Co­lao told se­nior ex­ec­u­tives at its In­dia unit that the pro­posed com­bined en­tity with Idea Cel­lu­lar would “truly be a co-man­aged com­pany”, likely to be mod­elled along the lines of the Bri­tish car­rier’s joint ven­tures (JVs) in the Nether­lands and Aus­tralia, two peo­ple aware of the mat­ter told ET. Voda­fone has equally owned JVs with Lib­erty Global and Hutchi­son in the Nether­lands and Aus­tralia, re­spec­tively.

The CEO, how­ever, re­frained from dis­cussing the pos­si­ble own­er­ship struc­ture of the pro­posed Voda­fone-Idea JV, they said.

A chief ex­ec­u­tive for the pro­posed Voda­fone-Idea merged en­tity would be named a few months be­fore the con­clu­sion of the merger, Co­lao told the In­dian ex­ec­u­tives. The merger could take 12-15 months to com­plete as it re­quires clear­ances from the tele­com depart­ment, Com­pe­ti­tion Com­mis­sion of In­dia and three courts.

On Thurs­day, Co­lao held a video con­fer­ence with the busi­ness heads of the com­pany’s In­dia arm to up­date them on the progress of the merger.

Voda­fone said it would not com- ment on ET’s queries on the in­ter­ac­tion be­tween the CEO and the In­dian ex­ec­u­tives.

Dur­ing the in­ter­ac­tion, Co­lao un­der­lined that a de­ci­sion on the CEO would be taken by the board of the merged en­tity, in which Voda­fone and the Aditya Birla Group that con­trols Idea would have equal rights, one of the peo­ple said.

SER­VICE REV­ENUE HIT

Al­though Co­lao was op­ti­mistic of “a suc­cess­ful con­clu­sion” to the merger with Idea, he cau­tioned the lo­cal ex­ec­u­tives also about the risks such mega trans­ac­tions face.

For in­stance, in New Zealand, that coun­try’s com­pe­ti­tion reg­u­la­tor on Thurs­day re­port­edly blocked Voda­fone’s pro­posed merger with Sky Net­work Television, say­ing the com­bined com­pany would en­joy a mo­nop­oly in pay-TV sports. Last month, Voda­fone and the Aditya Birla Group said they were in talks to merge Voda­fone In- dia and Idea in an all-share deal that would cre­ate the coun­try’s big­gest mo­bile phone com­pany by users and rev­enue mar­ket share. The UK telco had also said the ob­jec­tive was to cre­ate a self-funded In­dian JV with equal rights to take on Re­liance Jio In­fo­comm.

Co­lao urged Voda­fone In­dia busi­ness heads to “leave no stone un­turned in com­bat­ing Jio” in com­ing months in the run-up to the pro­posed merger with Idea, the peo­ple said.

The top ex­ec­u­tive em­pha­sised the group’s view of Jio as a for­mi­da­ble ad­ver­sary in In­dia’s fiercely com­pet­i­tive tele­com mar­ket. Last Novem­ber, Voda­fone slashed the value of its In­dia unit by

5 bil­lion (.`36,448 crore) due to in­creased com­pe­ti­tion sparked by the en­try of Jio. Prior to that the com­pany had taken a $3 bil­lion write off in 2010.

In In­dia, Voda­fone posted a 1.9% drop in ser­vice rev­enue in the quar­ter through De­cem­ber to 1,450 mil­lion, as com­pet­i­tive pres­sures un­leashed by Jio’s en­try and free ser­vices had hit prices as well as pre­paid top-up vol­umes. The com­pany’s data brows­ing rev­enue growth slowed to 0.6% in the fis­cal third quar­ter from 16% three months ear­lier. Co­lao re­cently pre­dicted in­tense com­pet­i­tive pres­sure in In­dia in the fourth quar­ter as well.

Merger could take 12-15 months to com­plete as it re­quires clear­ances from tele­com depart­ment, Com­pe­ti­tion Com­mis­sion of In­dia and three courts

Al­though Co­lao was op­ti­mistic of “a suc­cess­ful con­clu­sion” to the merger, he cau­tioned the lo­cal ex­ecs also about the risks such mega trans­ac­tions face VIT­TO­RIO CO­LAO

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