The company appointed new board of directors comprising 12 members, with Aditya Birla Group Chairman Kumar Mangalam Birla as the chairman. Balesh Sharma has been named the CEO of the merged company.
The immediate priority will be to consolidate its position across the range of service offerings. Balesh Sharma, CEO, Vodafone Idea, says: “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.
The new entity will start with a cash balance of Rs 193 billion from equity infusion of Rs67.5 billion by Idea and Rs86 billion by Vodafone. The sale of telecom towers by the two fetched Rs78.5 billion. The cash with company is after paying the telecom department Rs39 billion in dues.
“The merger will bestow two relatively immediate benefits — network capacity increase due to spectrum pooling (around 50%) and lower tower rentals. With a robust spectrum portfolio in urban markets, the mergeco is unlikely to be a pushover," says Srinivas Rao of Deutsche Bank Research.
It is a dominant leader in eight markets and a strong player in five (close to top two positions), which account for 65 per cent of the sector, according to Rao. While it will have a large base and spectrum resources, there are concerns about its ability to retain its revenue market share given the competitive market. Viju K George and Akash Verma of JP Morgan believe it will be an uphill climb, especially given that Jio is unlikely to relent on pricing.
“The big picture call is not so much cost/capital reduction but really revenue recovery, which allows for operating profit to materially dent leverage ratios,” they add.
Analysts have asserted that with a net debt of over Rs1,092 billion the new company will not be a position to go aggressive on pricing. It will have twin challenges of limiting the damage to its rural subscriber base from the Jio threat while at the same time protect its profitable higher average revenue per user base from competition.