The proposed Vodafone Idea merger, no doubt, will save both the companies from the Jio-inflicted competition but it is not going to be a happy affair for the employees at these two firms. An estimated 10,000 employees may have to quit the merged entity during the process.
The Vodafone Idea merger is going to be the merger of the Titans as the number 2 and 3 operators of the country are going to join forces to fight against an illusive number 1. The Vodafone Idea merger also is a classic case of overlapping assets – from spectrum to telecom towers, from workforce to retail outlets.
Before the entry of Jio, both the companies – Idea and Vodafone – were two full fledged operators having the required number of employees to run their business. As per last filed reports, Vodafone India has little over 13,000 employees and Idea Cellular has 17,621 employees, totaling to more than 30,000. In contrast, country’s largest operator Bharti Airtel is managing its services, almost smoothly, with around 19,000 employees.
Survival Was The Premise Of The Merger
The Vodafone Idea merger is happening because the firms want to survive against the onslaught of Reliance Jio that has invested more money in last 3 years compared to what the other two have invested in last 10 years. More than that, the Jio effect has, for the first time, forced Idea to witness a loss in last one decade.
So, the premise of this merger is to maintain the bottomline. When manpower cost, including employee salaries, perks and other incentives, amount for around 30 -35% of the company’s expenditure, it makes no sense for the merged entity to retain the overlapping workforce. The Vodafone Idea merger would have around 10,000 overlapping job profiles. This section may get the pink slips.
The job losses will happen at all levels, however, the major impact will be at senior and middle level. The merged entity may not like to have overlapping senior employees, who are the fattest pay takers.
Retail Outlets May See Closure
Besides employees, after the merger, the merged entity will have double the number of retail outlets. The top three operators of the country, Airtel, Vodafone and Idea, have their company owned branded outlets across the country, besides retail touch points at every nook and corner. And interestingly, the retail outlets of these operators are strategically placed very close to each other.
Now, after the merger, having separate retails outlets of Vodafone or Idea, does not make sense. And also, having two outlets at the same location is also not advisable. The Vodafone Idea merger would, for sure, see closure of many such outlets. By end of December 2016, Idea had close to 9,000 company owned outlets whereas Vodafone has more than 10,000 such outlets across the country. Half of these would see their shutters down post the merger. Or, in best case, some of these will be relocated.