Vodafone-Idea scouts for CEO as merger likely in first half of 2018

UK-based Vodafone, the only major international telco left in India, is gearing up for a leadership overhaul across roles ahead of the completion of a mega merger with Idea Cellular. 

The merger, expected to complete in the first half of calendar year 2018, is set to create India’s largest telco, surpassing Bharti Airtel, in an industry disrupted by newcomer Reliance Jio’s ultra-low tariffs. Approvals have already come from the Competition Commission of India (CCI) and Securities & Exchange Board of India (Sebi). Company officials did not comment on the matter. However, analysts are awaiting the financial result of Vodafone Group on Tuesday to get some answers related to the merger from the top management. 

In-house talent for top job

Sources said no search committee had been appointed to locate candidates for top posts, as there’s enough talent across the Vodafone Group, which operates in more than 25 countries. It’s another matter that Idea would have an equal say while appointing the chief executive officer (CEO) of the merged entity, according to the $23-billion deal struck earlier this year. 

It has already been decided that Aditya Birla Group Chairman Kumar Mangalam Birla would be the chairman of the new entity. Sources said it’s quite certain that the CEO would be an Indian. 

On the names of contenders, sources said Vodafone Managing Director (MD) and CEO Sunil Sood as well as Idea MD Himanshu Kapania remain candidates for the role of CEO in the merged entity. Among others with strong credentials is Balesh Sharma, who was the CEO Vodafone Czech Republic since 2013 and, recently, was appointed COO at Vodafone India. Another person could be Ravinder Takkar, who was till recently the CEO and president of Vodafone Romania. In July, Takkar was appointed chairman Vodafone Group Services, regional business development, and he’s responsible for representing Vodafone’s interests in India, including creation of the merged entity.

While the CEO would be a “consensus candidate”, the CFO would be chosen by Vodafone.

The road ahead

The UK firm, which entered India as a telecom player in 2007, would initially have a 45.1 per cent stake in the merged entity after it transfers 4.9 per cent to the Aditya Birla Group. While Aditya Birla Group would own a 26 per cent stake, it would have the right to acquire up to 9.5 per cent from Vodafone. In case Birlas don’t acquire another 9.5 per cent from Vodafone by the end of the fourth year, the UK telco would have to reduce its holding “to equalise its ownership with that of the promoters of Idea over the following five years”, Idea had said in March. 

With the reduction in its stake in the new combined entity, there have been murmurs about the possibility of Vodafone eventually looking at an exit from the Indian market. However, sources in the company dismissed such speculation and said Vodafone would remain invested in India. Long-term investor is how the group has been describing Vodafone’s India strategy. The quantum of shareholding is not important, but the presence and the growth of the brand is, sources said. 

Long-term investor

It’s not that Vodafone has not exited other markets. The US is one such market where Vodafone made an exit. But India remains promising, even as a joint venture partner, primarily because Europe is hyper competitive and Africa does not look lucrative. Also, it helps to have a local partner, sources said. But in the past, Vodafone decided to go alone and acquired 100 per cent in the India unit, which was a partnership with Essar till 2014.

In the past 10 years, Vodafone has invested around $30 billion (around Rs 1.95 lakh crore) in India, including spectrum cost. But over the past few months, the company has been losing subscribers and its profitability has been hit due to intense competition triggered by Jio, where Mukesh Ambani-led RIL has invested $20 billion.

Vodafone’s subscriber base was 208 million as of August and its average revenue per user was Rs 158 a month as of the fourth quarter of FY17. It’s the second-largest telco in the country, with a subscriber market share of around 17.5 per cent. The new entity will run both Idea and Vodafone brands simultaneously once the merger is completed. At least, that’s what the initial plans are.