Idea-Vodafone merger may prove challenging and costly, say experts

KOLKATA: Idea CellularBSE -0.70 % and Vodafone India plan to shortly kick off operational integration of their networks following the go-ahead by the competition regulator. But the exercise is likely to be fraught with challenges, possibly requiring tough and costly calls leading to consolidation of their ecosystem partners, experts said.

The Idea management, at an earnings call last week, said the company can “now plan the integration aspects” with approvals in place from the Competition Commission of India (CCI) for its merger with Vodafone India.

Brokerage house HSBC said “prompt CCI approval is a positive” but integration of Idea and Vodafone India’s operations will have to “be seamlessly executed” to ensure the merged entity is able to contest market disruption by Reliance Jio Infocomm that is expected to continue for several quarters.

Rajiv Sharma, HSBC director and telecom analyst, said the Idea-Vodafone operations integration “may not be easy as the two organisations differ significantly in terms of billing systems, network vendors and culture.”

Former Bharti Airtel CEO Sanjay Kapoor backed the view, saying an Idea-Vodafone merger would induce the need to make several tough choices around technology vendors, IT partners, CRM partners (such as third-party contact centres), and should naturally lead to realignment of existing agreements and contracts with their respective partners.

“Since the objective would be to build synergy and avoid duplication of network, systems, people resources and partners on a circle-by-circle basis, the consolidation at the ecosystem partners level is inevitable,” he said.

IDEA Cellular Limited