July 23, 2019

Trouble in paradise for Jio? - The Idea Vodafone Merger

With the introduction of Reliance Jio and its strategy, companies like Idea and Vodafone were in a great tension. Jio was using a strategy to hand out freebies to win over customers which was a competition caught by surprise, resulting in heavy losses for the establishment! Reliance Jio has already gathered 20% of revenue market share in just a matter of 2 years. That is when the merger of Vodafone and idea was when the initial idea came up. It was the need of the hour with Jio rapidly swallowing a major chunk of their customers!

Trouble in paradise for Jio? - The Idea Vodafone Merger

On 31st August 2018, Vodafone India merged with Idea cellular and was renamed as Vodafone Idea Limited. Balesh Sharma, was appointed as the CEO of the company. This completely shook the market and left other telecom companies in awe. It changed the whole landscape of money spinning sector. It currently has more than 430 million subscribers which exceeds Jio and Airtel and all the others in market. It has stunning revenue market share of 37%. With a revenue market share of 32% and also an extensive broadband network with over 3,40,000 broadband sites which covers 840 million subscribers, Vodafone-Idea Limited also has the widest distribution reach with over 1.7 million retailers and 15,000 branded stores to service customers.

The merged entity now has a spectrum portfolio of about 1,850 MHz which is the largest voice network in the country with over 2 lakh GSM towers and about 2.35 lakh kms of fiber connectivity. This covers as much as 92 per cent of the population by reaching almost 5,00,000 towns and villages all over the country.

At the start, Vodafone will be a dominant partner in the merger owning 45.1% stake after it transfers a stake of 4.9% to the Aditya Birla group for Rs 3,874 crore in cash to complete the merger. Aditya Birla group then owns 26% stake in the company, although will have the right to acquire more shares from Vodafone under an agreed mechanism with a view to equalise the shareholding over time.

If Vodafone and the Aditya Birla Group’s shareholding in the combined company are not equal after four years, Vodafone will sell down shares in the combined company to equalise its shareholding to that of the Aditya Birla Group over the following five-year period.

The reason why Vodafone idea is leading is due the flexible factors that attract the users :

Better network quality to users-

The company claims that it has the largest voice over network and they guarantee that they provide better 2G , 3G and 4G experiences.

Also they catch up on network capability and customer experience really quickly .

Usage of new and advanced technology-

Vodafone Idea also provides services including Mobile payments, IoT, advanced enterprise offerings and entertainment, accessible via digital channels which attracts a vast number of users through the multi platforms . Hence attracting more subscribers through better technological use and better usage of resources.

Welcoming customers to India's leading telecom network, Mr. Balesh Sharma, CEO, Vodafone Idea Limited, said, "As India's leading telecom operator with two popular and loved brands, the company has the scale and resources to ensure sustainable customer choice and introduce new technologies. We are committed to offer both our retail and enterprise customers an excellent experience while fulfilling their evolving digital and connectivity needs via new products, services and solutions. We will offer them more network coverage, more value and more excitement. My team and I look forward to your continuing support and invite you to enjoy the Vodafone Idea experience."

Hence the merger of Vodafone and Idea really proved to be a game changer for Jio’s amazing strategy. It surely seems to be a threat to all the other telecom companies too. When Jio was celebrating its success, Idea and Vodafone really did change the tables around, didn’t they? The merger of Vodafone and idea showcases how two powerful companies can team up together change the whole market to a new level.

The question still lies whether Jio has turned out to be the more successful one here or Idea-Vodafone together? The fact of course remains that at a point Jio did manage to bring down two the powerful companies to a level where they felt a need of a collaboration. On the other hand, Idea-Vodafone didn’t let us down, they did eventually manage to beat Jio together with a 430 million users and holding the majority of the revenue market. There can be an endless argument on who really succeeded but as customers, we are really getting some treat either ways!

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