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Vodafone is an MBA case study of messed-up M&A

There’s hidden value in Vodafone Group, the sprawling telecommunications company (and parent of South Africa’s Vodacom Group) whose market capitalisation has shed more than US$50-billion in nearly five years. It offers business students a lesson in the good, the bad and ugly of mergers and acquisitions. The only thing missing is the ultimate deal: a break-up bid.

Things aren’t going well. The shares recently slid beneath the psychological 100p level. The competition has been whipping Vodafone in Germany, its main market. Management is struggling to convince investors that high debt from dealmaking will come under control. Activist Cevian Capital gave up on the stock earlier this year, but telecoms billionaire Xavier Niel has taken its place as a potential agitator.

Rewind to 2013 and it’s hard to believe Vodafone could have got into such a pickle. Then-CEO Vittorio Colao agreed to an exit from its joint venture with Verizon Communications for $130-billion. Most of the payment received — mainly a mix of cash and Verizon shares — was funnelled to shareholders. That was a great deal making a hiatus in years of empire building. Sadly, the sequels in this M&A saga have been a letdown.

Vodafone added cable infrastructure to its portfolio pursuing a so-called convergence strategy to sell phone, Internet and pay-television services. Having offered $11-billion to take control of Kabel Deutschland in Germany, it then gobbled up Spain’s Grupo Corporativo ONO for $10-billion. The Spanish market later became viciously competitive.

In 2018 came the $22-billion acquisition of assets from rival Liberty Global. This filled gaps in Vodafone’s German coverage. Less than a week after the announcement, Nick Read, then chief financial officer, was announced as Colao’s successor and given the mammoth integration job. True, Colao had been boss nearly 10 years, but the succession was hardly ideal. Vodafone shares have badly trailed European peers ever since.

To be fair, the idea of becoming a bundled telecoms provider made sense, and it would have taken years to build this from scratch instead of doing acquisitions. The snag is that Vodafone has not run the assets well. Having initially reaped synergies, poor customer service has seen it lose German market share. If you do expensive M&A, you have to be a flawless manager of what you buy.

Vodafone also took on a lot of debt. It’s a fine judgment, but it would have been wiser to retain more of the roughly $80-billion returned to shareholders after the Verizon deal and keep more headroom.

Then there are the deals Vodafone didn’t do, or took its time over. Its assets span Europe and emerging markets. Yet what matters most in telecoms is scale within not across borders, while a multinational footprint adds complexity for investors. Vodafone could have done more to focus on select markets in Europe while finding better owners for everything else. That would have accelerated debt reduction and made the company a more manageable beast.

Earlier this year Vodafone passed on a deal with Masmovil Ibercom, letting Orange steal a march on Spanish consolidation. And while this month’s agreement on a partial sale of its mobile towers will cut leverage, it’s a governance fudge with a consortium of private equity and Saudi Arabian money. It would have been better to do a straight disposal years ago.

There is no rabbit that CEO Read can now pull from the hat. Regulators are likely to be more wary of permitting consolidation within Vodafone’s markets when consumers are stretched. A mooted combination with Three UK, owned by CK Hutchison Holdings, has yet to materialise.

Read’s best bet is to run the operations better, cut costs and grasp any M&A opportunities that fortune presents hereon. He could also be clearer that shareholders will benefit as debt comes down. Analysts at New Street Research see potential for a €4.9-billion cash return if things go well.

A smaller company with this record would be a takeover target itself. Vodafone’s enterprise value, exceeding $90-billion, offers protection from that threat. The fantasy deal would be a well organised consortium of buyers looking to carve up the firm between them. If that loomed, defending the status quo would be a huge challenge.

It’s up to chairman Jean-François van Boxmeer to decide whether Read is successfully leading Vodafone out of the mire. But any CEO here would have the same limited options for turning this monster around.  — (c) 2022 Bloomberg LP

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Vodafone Is an MBA Case Study of Messed-Up M&A: Chris Hughes

By Chris Hughes

There’s hidden value in Vodafone Group Plc, the sprawling telecoms company whose market capitalization has shed more than $50 billion in nearly five years. It offers business students a lesson in the good, the bad and ugly of mergers and acquisitions. The only thing missing is the ultimate deal: a break-up bid.

Things aren’t going well. The shares recently slid beneath the psychological 100 pence level. The competition has been whipping Vodafone in Germany, its main market. Management is struggling to convince investors that high debt from dealmaking will come under control. Activist Cevian Capital AB gave up on the stock ...

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Vodafone Case Study

Introduction.

Vodafone Case study describes the situation when  Idea Cellular and Vodafone after the entrance of JIO. So, here is the Vodafone case study which describes the position of Vodafone and Idea Cellular before and post-merger, reasons for the merger, how did merger take place and critical analyses of the merger.

About Vodafone 

Vodafone company came from the UK based Vodafone Group plc. It is a multinational service provider of telecommunications in 22 different countries as of 20th November 2020. And, in India Vodafone has its headquarter in Mumbai, Maharashtra. Vodafone is the third largest telecommunication provider in the country. Vodafone

At the beginning of the year, 1992 Vodafone started its company in India from Bombay(now Mumbai). After the entry of JIO in the year 2016. Afterwards, our Vodafone case study begins, Vodafone and Idea announced their merger in March 2017. And as of 31st August 2018, it is known as Vodafone Idea Limited.

Vodafone Idea Merger Case Study

Vodafone case study explains the reason and the situation of the merger of Vodafone and Idea. This merger was first announced in March 2017. Afterwards, in July 2018, the department of telecommunication gave the approval for the merger. Finally, on 31st Aug 2018, the merger was completed and it is announced as Vodafone Idea Limited.

And this merger was the largest telecom merger in India. As per this merger, Vodafone holds a 45.2% stake, Aditya Birla Group holds 26% and the remaining stakes were held public. So, to understand the Vodafone case study, let’s understand the reasons for the Vodafone Idea merger case study.

Reasons For Vodafone Idea Merger

So, while understanding the Vodafone case study lets us understand the reason for the Vodafone Idea merger. 

• The main reason for the Vodafone-Idea merger is to Handel the rising dominance of Reliance Jio in the Telecom industry. As Jio announced to provide free services in the first 6 months. As a result, it started to capture the maximum part of the market.
• Secondly, the free services from the Jio started the price war between the companies in the telecom sector( as it in an oligopoly market structure ).
•  As a result in case of a price war merger brings confidence in companies with synergy benefits. 
• At last, the combined entity of Vodafone and Idea was expected to hold a strong position in the industry . Such as in some circles it became the largest cellular service provider and in some circle, it was the second-largest after Bharti Airtel. So, a joined company can focus on being the service provider in pan India.

So, these were the reasons in Vodafone case study for the merger of Vodafone and Idea.

Vodafone Idea Integration

According to the past in the telecom industry, major telephone operators believes the merger is a strong tool to be in the lead position. As Airtel acquires the Telenor, it acquires the scope and business from other small telecommunication companies like Augere Wireless, Videcon, Tikona(4G Spectrum) etc. 

Also, Reliance Communication (R Com) merged with Aircel and acquire MTC. Plus the Tata Telecom also started the process of merging with R Com. As a result in a period of seven months telephone operators numbers went down to seven from twelve.

However, the announcement of the merger creates a negative image in the public, when the Vodafone and Idea merger was announced the Idea prices started to drop . And the share price of Idea declines from Rs. 97.70 on 20th March 2017 to Rs. 81.81 on 6th Sep 2017.

But the merger was important it gave support to the two companies, which were struggling to survive in the industry. Combined resources will help to compete with only the two biggest brands(Jio and Airtel).

So, these were the challenges of Vodafone and Idea merger in case of Vodafone case study.

Critical Analysis Of Vodafone Case

The merger of Vodafone and Idea in Vodafone case study gave higher stakes to the Idea promoters as compared to Vodafone. So, in long run, both companies can gain access to equal shares in the future. 

Here are the few takeaways from the Vodafone Idea merger in Vodafone case study: 

• The very first thing was the acquisition of 4.9 per cent shares of Vodafone by Aditya Birla . This would amount to a total of Rs. 3874 crore wherein each share is worth Rs. 108 . This would be helpful in increasing the shareholding capacity of Idea to 26 per cent .
• While in the case of Vodafone case study, Vodafone holds 45.1 per cent of the shares in the merger, Idea would be allowed to buy another 9.6 per cent but at a cost of Rs. 130 per share in the period spread over the next four years. However, if Idea is unable to come up equal to the shareholding percentage of Vodafone, it can go forward and buy the number of shares required further but at the price prevailing in the market.
• And, the chairperson of the newly formed enterprise would be Kumar Mangalam Birla . On the other hand, Vodafone had appointed the Chief financial officer . As, after that new CEO was named under both the companies.
• Lastly, the promotors of both entities have the right to nominate three members for the board . Also, there are 12 members out of which 6 are independent on the board in the Vodafone case study of Vodafone and Idea merger. 

Idea Positioning Before Merger

In Vodafone case study of Vodafone and Idea merger, now lets understand the Idea Cellular Limited is an Aditya Birla Group company. Founded in 1995, the company was incorporated as Birla Communications Limited and had a license of GSM-based services in Gujarat and Maharashtra Circle. In the following years, the organization started to expand its business with Tata Group, Birla and AT&T group of the US in joint venture form. 

In August 2015, Idea announced the rollout of its 4G services. It was now competing with Airtel and Vodafone – in a non-monopolistic market. The company relaunched its “What an Idea” campaign taking 4G to the rural areas and empowering people through the usage of 4G services.

But in the year 2016 sudden announcement from Mukesh Ambani about Reliance Jio disrupted the Indian telecom sector. Below pie chart shows the market share of different telecom players before the entry of Jio.

As the Indian market is very sensitive towards price and Jio used it to make most of the profits. So, Jio started to make its all services free for the first six months. Afterwards, they made the services of voice calls, data extremely cheap. As a result, JIO captured a significant share of the telecom industry. Here is the pie chart of the post-Jio market share of various telecom players.

Vodafone Idea Merger

This transaction required various approvals from government authorities including SEBI, dept. of Telecom and Reserve Bank of India among others. The Department of Telecommunications (DoT) has given the green signal for the merger of Vodafone India and Idea in our Vodafone case study, the largest Merger and Acquisition agreement in the sector, which has displaced Bharti Airtel from top position after over 15 years. The approval conditions, which were given over a year after the agreement, were announced in March 2017 which included an advance payment of Rs 7,268 crore. 

Idea Contributon

Promoters Aditya Birla Group infused Rs 3,250 crore in Idea Cellular , which separately raised Rs 3,000 crore ahead of a planned merger with Vodafone India. Following the equity infusion by Idea’s promoters, their stake in India’s third-largest telecom operator rose to 47.2% from 42.4% now. Idea contributed its assets which included standalone towers with 15,400 tenancies and a stake in Indus towers Ltd of 11.5%. 

The entry of Reliance Jio Infocomm Ltd in September 2016, with free services for almost seven months and cheap tariffs, had eroded margins and impacted the revenue of rivals. The contribution of Vodafone will be Vodafone India along with standalone towers with 15,400 tenancies without including an 11.5% stake in Indus Towers. According to the agreement between Idea and Vodafone.

Vodafone will contribute more amount of net debt, about Rs 2,480 crore than Idea at the completion of the merger. Post-termination of both companies, the combined entity will be a joint venture between Vodafone and Idea in the Vodafone case study. Which will account for the under the equity method, controlled by both Aditya Birla Group and Vodafone.

Idea promoters hold the rights to acquire a 9.5% additional stake from Vodafone under the agreed deal to equalize shareholdings over time as per the following proposition

Vodafone: 45.1% – 9.5% = 35.6%

Idea: 26% + 9.5% = 35.6%

Impact of Merger on Telecom Industry

There are also several other implications that this merger of Vodafone case study will bring forth on the telecom industry.

1. Firstly, there can be initiatives based on the renewal of price discipline for the disruptive entry by Jio has caused some serious misbalance

2. Secondly, the poor financial health of the telecom sector can be observed. And through such mergers, there will be an infusion of health and life. Since India is the fastest-growing market in terms of subscriber base .

3. Through the merger, Vodafone and Idea will overcome their debts and a large sum of credit will be infused into the system

4. The deal has also saved both the telecom companies from selling off their business . As was being planned by them initially and this would directly impact the quality of services being provided by different players in the industry

The merger in the Vodafone case study will surely boost the pace of the telecom sector. It has also been found that the savings, synergies and also the spectrum will have a substantial impact on the escalating growth. 

There will be a saving of over 60 per cent of the cost of the operation and this will aid in improving the quality and performance of the service through investments from the saved money.

Enhancement in network infrastructure will be observed while the operational efficiencies have a chance to reach excellence. Moreover, the revenue market share is expected to rise for all the locations and the spectrum of the entity would exceed the initial caps.

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Idea and Vodafone Merger: A saga of becoming India’s Largest Telecom Company

Indian telecom industry is witnessing one of the largest mergers ever between vodafone india and idea cellular. the deal is said to upbeat humongous player such as reliance jio behind. find out more significant details about the deal in the mba case study and enhance your knowledge base..

Case study is an inevitable aspect of MBA programme. The word in itself speaks about the volume of knowledge which an MBA Aspirant needs to possess on multi-lateral issues occurring in the business environment. These industries affect the economy of our nation and hence the growth and well-being of the business is inter-dependent on them. In addition, MBA Case Study also helps you gain considerable knowledge that you can use in the essay writing (WAT) and Group Discussion (GD) round to make it to the top MBA colleges.

In this article we will be discussing about a huge and an unanticipated change that is being observed in the telecom industry between two telecom giants, i.e. Vodafone India and Idea Cellular. Idea cellular which is owned by Kumar Mangalam Birla have come forward with the proposition to merge with Vodafone India. This would result in the biggest company considering the number of subscriber base catered by both the players.

The merger will leave Bharti Airtel off its hook from being the number one from past 15 years. There are several aspects that are to be looked into while developing an understanding about the features associated with merger and the impact it would make on the consumers and the telecom industry as a whole.

Key Highlights of Vodafone-Idea Merger

The merger will give a higher stake to the promoters of Idea as compared to Vodafone India so that in the long run both the companies are able to gain access to equal hold

1. The first step for AB group would be the acquisition of 4.9 percent of shares from Vodafone. This would amount to a total of Rs. 3874 crore wherein each share is worth Rs. 108 . This would be helpful in increasing the share holding capacity of Idea to 26 percent

2. While Vodafone holds 45.1 percent of the shares in the merger , Idea would be allowed to buy another 9.6 percent but at a cost of Rs. 130 per share in the period spread over next four years. However, if Idea is unable to come up equal to the shareholding percentage of Vodafone, it can go forward and buy the number of shares required further but at the price prevailing in the market

Top 10 Mergers and Acquisitions of 2015-16

3. The chairman of the new combined entity would be Kumar Mangalam Birla while Vodafone would appoint the chief financial officer . The CEO of the new entity would be named jointly by both the companies under a joint agreement

Significance of the Merger for Consumers

The merger holds significance for the consumers also, as a rapid change can be expected in the market organisation and the telecom industry development.

1. The Indian telecom industry would see the domination of three telecom giants of which Vodafone-Idea would be the largest. Additionally, Bharti Airtel and Jio have been found as the dominating counterparts in the telecom industry.

Reliance Jio Amazing Facts

Impact of Merger on Telecom Industry

There are also several other implications that this merger will bring forth on the telecom industry.

1. Firstly, there can be initiatives based on the renewal of price discipline for the disruptive entry by Jio has caused some serious misbalance

2. Secondly, the poor financial health of the telecom sector can be observed and through such mergers there will be infusion of health and life since India is the fastest growing market in terms of the subscriber base .

3. Through the merger, Vodafone and Idea will overcome their debts and large sum of credit will be infused in the system

4. The deal has also saved both the telecom companies from selling off their business , as was being planned by them initially and this would directly impact the quality of services being provided by different players in the industry

The merger will surely boost the pace of the telecom sector. It has also been found that the savings, synergies and also the spectrum will have substantial impact on the escalating growth. There will be saving of over 60 percent of the operations cost and this will aid in improving the quality and performance of the service through investments from the saved money. Enhancement in network infrastructure will be observed while the operational efficiencies have a chance to reach excellence. Moreover, the revenue market share is expected to rise for all the locations and the spectrum of the entity would exceed the initial caps.

We hope that the MBA case study on Vodafone and Idea merger would have help you acquire knowledgeable insights about the scenario of Indian telecom industry.  

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MBA Case Study on Idea and Vodafone Merger Saga

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With a population of 1.38 billion people, India has one of the largest telecom markets in the world. Up until 2016, there were more than a dozen telecom service providers operating in the country.

But in 2016, a new provider entered the marketplace, causing major disruption to the telecom market and triggering massive changes, including increased competition and price wars.

To adapt to these changes, two of the top telecom providers in the country—Vodafone India and Idea Cellular—decided to merge to become Vodafone Idea Limited (Vi). According to Vineet Chauhan, Vice President and Head of Digital Technology at Vi, the two businesses decided to embrace the market changes. “It was a great opportunity to serve more and more customers through our ever-improving network, best-in-class data speeds, and great products and services,” he says.

A merger of this size was unprecedented. The two companies needed to consolidate without significantly disrupting operations or service to customers. At the same time, Vi wanted to execute on its vision of becoming a digital-first company.

Rapid growth

A new digital retailer app platform adds 7 million subscribers per month

Revenue management

The digital retailer app is used to manage revenue of USD 200 million each month

Vi had a long history with IBM, so it turned to IBM® Consulting to help plan and execute its massive digital transformation and its consolidation and integration projects. “We partnered with IBM to drive digital transformation at the scale that we needed to,” says Chauhan. “And in this partnership with IBM, our three pillars are trust, transparency and agility.”

A key component for the merger was digital transformation. “We set out to transform ourselves,” says Chauhan. “As a digital-first organization, we wanted to make sure that we delight consumers at every touchpoint, every time. We have the kind of products and offerings that are innovative, personalized, contextual and relevant.”

Working alongside IBM, Vi created a “digital factory” to help transform the various Vi digital properties, including websites, mobile apps and new digital platforms. As it rolled out the new Vi brand, the company launched these new websites and mobile apps during the day with zero downtime. “Our consumers use the website for information, to subscribe or to recharge their prepaid phone,” says Chauhan. “Our postpaid subscribers come and make a bill payment. And we can present exciting offers. So, we turned all these functions around and we were seamlessly able to transition into the new brand.”

The digital transformation enabled new digital platforms for Vi’s channel partners. Vi worked collaboratively with IBM in the digital factory to launch several first-of-a-kind solutions, such as a new digital retailer mobile app platform supporting contactless recharges and contactless UPI-based balance transfers. Using the digital retailer app, customers can recharge their prepaid phone easily while maintaining the social distancing required for COVID-19 safety. In addition, distributors can make contactless UPI-based balance transfers, so retailers can always get the recharges they need without requiring representatives to travel to retail locations.

These initiatives help some 300 million Indian citizens stay connected, without any issues, during the COVID-19 pandemic. With the new digital retailer app, Vi is gaining seven million new subscribers per month and managing monthly revenue of USD 200 million. Plus, the company launched a new digital sales acquisition platform, driving a 100% increase in digital acquisitions in three months.

Nirupmay Kumar, Executive Vice President of Technology at Vi, oversaw integration strategy, solution design and demand management for enterprise and consumer business during the consolidation and integration projects. “We interacted very closely with IBM to identify our business requirements and to determine how to design the systems,” says Kumar. “IBM also helped us detail all of our requirements to make sure that nothing was missed.”

Kumar and his team handled the job of consolidation design of the IT systems from both Vodafone and Idea. “So the challenge was how to identify the right set of applications that can support double the subscriber base, along with future growth and functionalities,” says Kumar. This was no easy task, considering the size and IT landscape maturity of the two companies. “IT Transformation project for a telecom company is like changing the engine while the flight is in the air, you have to upgrade with minimal or no downtime” says Kumar.

As Kumar and his team worked with IBM to determine which enterprise applications could best support the newly merged organization, they found at times that the best choice was to transform an existing system rather than consolidating. And in some cases they created new functionality. In the past, neither company had a digital platform for the enterprise consumer, so Vi and IBM created a new digital platform to provide self-service options to Vi enterprise customers. In fact, the Vi enterprise digital platform won five awards at the prestigious ICMG Architecture Excellence Awards competition. The new enterprise digital platform has delivered a 35% increase in payments, a 60% growth in customer self-servicing and a 70% rise in new customer registrations in one year.

Sanjeev Vadera, Vice President and Head of Integration Program Management at Vi, handled consolidation and operations for the consolidation and integration projects. Part of the consolidation program involved moving many applications and services to a virtualized cloud to reduce the cost of ownership. “In the back of our minds, we were always looking for ways to move to the cloud as much as possible,” says Vadera. “We did a lot of virtualization as well.” The IBM and Vi team successfully executed 32 parallel transformation programs within just 18 months. These projects impacted nearly 300 million customers (or approximately one in every four Indian citizens) and two million channel partners across more than 700 business processes.

Although the consolidation and integration program was originally projected to take three to five years, Vi was able to complete it within 24 months with help from IBM. The company also completed the digital transformation with minimal impact on its consumers. “For the majority of our consolidation projects, we ensured that there was zero customer impact,” says Vadera. “With IBM’s help, we did iterations of mock migrations to create the strategies for how we can reduce downtime.”

In total, Vi and IBM consolidated more than 350 applications down to approximately 200. In addition, the teams migrated 140 applications from three data centers to one data center. Ultimately, the project will result in the consolidation of four data centers into one. Through this consolidation, Vi has saved USD 600 million so far.

In addition, IBM is helping Vi with its network domains. Vi collaborated with IBM to deliver its first major production milestone for core network functions on its open universal hybrid cloud, powered by IBM and Red Hat. The platform enables IT and network applications to run on a common cloud architecture, which is designed to deliver ROI improvements through the optimization of CapEx, OpEx, skills and automation investments across both the network and IT application domains. The hybrid cloud is based on open technology and open standards from IBM and Red Hat, and it delivers a wide range of capabilities, including IBM Watson® AI and the Red Hat® Ansible® Automation Platform (link resides outside ibm.com), which can help strengthen Vi’s capability in network and IT planning.

Vadera and his team also teamed with IBM to implement the Big Data Lake program at Vi. The Big Data Lake program is one of the biggest open-source-based data lakes implemented globally in a telecom company. “The business analytics and intelligence needs for the new company needed to be very different from the existing tools and applications used by Vodafone and Idea, so we decided build a completely new system,” says Vadera.

The launch of the new Big Data Lake data platform has delivered significant value to Vi. “The program has brought immense business benefits to Vi, with close to a 40% cost reduction and a 60% reduction in operational complexity,” says Aditya Ghosh, Associate Vice President of IT for Analytics at Vi. “We’re going to be ahead of the curve with a future-ready, modern and open-source platform.”

The new data platform, which replaced two existing data warehouse platforms, processes over 15 billion records per day, creating more than 2,000 business KPIs daily. The data lake is a massive 10-petabyte platform. It’s helping Vi take the next big step into the AI domain, with the implementation of major AI- and machine-learning-related use cases for network experience improvements, new planning and customer experience improvement.

According to Himanshu Jain, Senior Vice President at Vi, the partnership with IBM was key to the success of the project. “IBM brings robust governance framework, agility to scale up and domain expertise to the table,” he says. “And IBM has really helped us digitize our organization during challenging times due to COVID-19.”

Vi anticipates that it will continue to work with IBM to achieve its goals. “Now we have a very strong platform that we can use as a springboard for more innovation, more features,” says Kumar. “Our relationship with IBM is growing day by day, and I look forward to working with IBM as a trusted partner for many years to come.”

Vi  (link resides outside of ibm.com) is one of the leading telecom providers in India. The company serves approximately 300 million subscribers across more than 480,000 towns and villages throughout India. In addition to having the largest telecom network in India, Vi provides pan-India voice and data services across 2G, 3G and 4G platforms. It is headquartered in Mumbai and Gandhinagar and reported revenue of USD 6.4 billion in 2020.

To learn more about the IBM solutions featured in this story, please contact your IBM representative or IBM Business Partner.

© Copyright IBM Corporation 2021. IBM Corporation, IBM Consulting, Orchard Road, Armonk, NY 10504

Produced in the United States of America, June 2021.

IBM, the IBM logo, ibm.com, and IBM Watson are trademarks of International Business Machines Corp., registered in many jurisdictions worldwide. Other product and service names e trademarks of IBM or other companies. A current list of IBM trademarks is available on the web at “Copyright and trademark information” at  ibm.com/legal/copyright-trademark .

Red Hat® and Ansible® are trademarks or registered trademarks of Red Hat, Inc. or its subsidiaries in the United States and other countries.

This document is current as of the initial date of publication and may be changed by IBM at any time. Not all offerings are available in every country in which IBM operates.

The performance data and client examples cited are presented for illustrative purposes only. Actual performance results may vary depending on specific configurations and operating conditions. THE INFORMATION IN THIS DOCUMENT IS PROVIDED “AS IS” WITHOUT ANY WARRANTY, EXPRESS OR IMPLIED, INCLUDING WITHOUT ANY WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND ANY WARRANTY OR CONDITION OF NON-INFRINGEMENT. IBM products are warranted according to the terms and conditions of the agreements under which they are provided.

Vodafone: Building a global organization

Vodafone, the world’s largest mobile telephone network operator, was one of the great growth stories of the 1990s. Founded in the early 1980s, Vodafone first built a strong base in the UK, and then expanded abroad in the late 1980s and early 1990s. By 2000, Vodafone had the largest network in the world and shifted its attention to a new priority: creating an effective global organization that would capture synergies in revenue growth, cost reduction, and capital expenditures. The challenge would not be easy. Most of Vodafone’s operating companies had their own brand names, distinct channel strategies, and local product strategies. Exactly how to design and manage the new organization was not clear.

This integrative case begins with a discussion of industry forces and company strategy, and then examines the process of designing a global organization. Next, it focuses on global branding, which involves not just setting a brand strategy and migrating local brands, but also executing a global campaign of communications and sponsorships.

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Merger And Aquisitions: A Case From Indian Telecom Sector Vodafone & Idea

J.N. Vidani (2018), Merger And Aquisitions: A Case From Indian Telecom Sector Vodafone & Idea, Compendium of Research Papers of National Conference on Leadership, Governance and Strategic Management: Key to success, ISBN 978-81-92742-34-2, Volume 5, Issue 1, p105-108

10 Pages Posted: 13 May 2021

Jignesh Vidani

L.J. Institute of Management Studies

Date Written: February 28, 2018

Merger and Acquisitions have always been one of the a single operation base with 31 million customers, the strategies to enter into the intemational market creating company has expanded its operations across the country a synergy for both the companies. The world market has to cover all 22 telecom circles and scrvice 210 million witnessed a number of mergers and acquisitions which customers. This journey is a strong testimony of had the same vision and the objective. Talking about Vodafone's commitment and success in a highly Indian market which had many mergers and competitive and price sensitive market. acquisitions in the past and will also is having many more in the coming future. Taking an example of the Indian Telecom sector where we had Unitech-Telenor, Hutch-Vodafone and now there is ldea-Vodatone. The with Voda fone. majority stake in Hutchinson Essar in May 2007. From At Vodafone India, They believe that their customers are at thec heart of everything that they do. That's why over 210 million Indians have chosen to stay connected case which this paper will discuss is the case of the merger of Vodafone with Tdea. We all are aware that They have the knowledge of global best practices along Vodafone acquired Hutch and entered into the Indian with the deep exposure to local markets which has made Telecom sector where we saw changes in its services and advertising campaign from Pug to ZooZoos to love Since commencing operations in 2007, they have couples to Bala and her wife to the last one Christmas consistently been awarded for the best-in-class song. The campaign has always focused on its high network, powerful brand, unique distribution and network range as well as best services at a minimal cost. unmatched customer service. Whether an individual or After the 4G network the company's campaign also enterprise, their customers always receive world-class focused on the high speed internet services with services that cater to theirneeds." exciting data packages at cheaper rates. As per the deal Idea Cellular is an Aditya Birla Group Company, India's structure, Vodafore and Aditya Birla Group will hold 50 first truly multinational corporation. Idea is a pan-India percent and 21.1 percent respectively in the combined integrated wireless broadband operator offering 2G, 3G entity. The case will throw light on the merger of the Vodafone with Idea creating a best synergy eiiect to operations, and ISP license. Idea is one of the top three capture the market share. The Case will also highlight mobile operators in India, with annual revenue in major advertising campaigns of the Vodafone and excess of USD 5 billion and a revenue market share of strategy behind them.

Keywords: Merger, Acquisitions, Advertising, Campaign, Zoozoos, Synergy

Suggested Citation: Suggested Citation

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A Study of Merger and Acquisition and Its Impact on Profitability Performance of Selected Merger (With Reference to Vodafone Idea Merger)

• First Online: 23 August 2022

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• Suruchi Satsangi 12 &
• Prem Das Saini 12  

Part of the book series: Flexible Systems Management ((FLEXSYS))

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Mergers and acquisitions are vital choices taken to boost an endeavor's blast through improving its assembling and promoting tasks. They are adopted to use and gain advantage power, expand the purchaser base, cut competition or enter into a brand new market or product section. When globalization of the Indian financial system was started in 1991, it was believed that it would suggest foreigners were not the handiest doing enterprise in India but additionally taking over Indian organizations. The objectives are to review the case of Vodafone-Idea related to M&As and analyzing its before- & after- performance of the company and its impact on the basis of profitability performance of the selected companies. The study is based on an analytical research. The data are taken from secondary sources from several websites. The time period of the study is two-year pre & two-year post of the selected companies. The base year is considered as zero. To analyze the profitability performance, ratios and t test has been used as a tool for further analysis of the paper.

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Satsangi, S., Das Saini, P. (2022). A Study of Merger and Acquisition and Its Impact on Profitability Performance of Selected Merger (With Reference to Vodafone Idea Merger). In: Anbanandam, R., Rangnekar, S. (eds) Flexibility, Innovation, and Sustainable Business. Flexible Systems Management. Springer, Singapore. https://doi.org/10.1007/978-981-19-1697-7_12

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MAKING LAW SIMPLE!

Mergers and Acquisitions: Case Study of Vodafone Idea Merger

By: Vaidehi Sharma

Introduction to mergers and acquisition  

‘Mergers and acquisitions’ is a technical term used to define the consolidation of two or more companies. When two companies are combined to form one unit, it is known as a merger, while an acquisition refers to the buying of one company by another one, which means that no new company is formed, only one company has been absorbed into another. Mergers and Acquisitions are an important component of strategic management, which comes under the head of corporate finance. The subject concerns buying, selling, dividing, and combining various companies. It is a  type of restructuring to have rapid growth and increase profitability. 

Mergers and acquisitions are part of the strategic working of any business or working group. It involves the joining of two businesses with the object to increase market share and profits and to have an influential impact on the industry. Mergers and Acquisitions are complicated processes that require preparation, analysis, and deliberation. There are a lot of parties who might be affected by a merger or an acquisition but before a deal is finalized, all parties need to be taken into consideration, their concerns should be addressed, and all possible hurdles that can be avoided must be avoided. 

The term ‘Merger’ has not been defined under the Companies Act, 2013 or  Income Tax Act, 1961 , but as a concept ‘merger’ is a combination of two or more entities into one; with the accumulation of their assets and liabilities, and coming together of the entities into one business. 

The other word for Merger is ‘Amalgamation’. Under The Income Tax Act, 1961  (ITA) ‘amalgamation’ is defined as the merger of one or more entities with another company, or the merger of two or more entities forming one company. It also mentions other conditions to be satisfied for an ‘Amalgamation’ to benefit from the beneficial tax treatment. 

For example -A company called and a company called B merge to form a new company called C . This is called a merger. 

The effect of the merger is that the assets and liabilities of both companies will now be shared and they will cease to exist as independent companies . 

Benefits of Mergers 

⮚ Profit and resource sharing – The resources of both companies are pooled together which increases the profit outcome.

⮚ Access to New Markets – Entering into new markets can be challenging for any company even for established companies. While setting up a subsidiary  or branch is always an option, a merger or acquisition can save companies a  significant amount of time, effort, and money compared to starting from  scratch  

⮚ More Economic Strength and Competitive Edge – mergers and acquisitions mean financial strength for both companies. It can help them to become more powerful in the market, attract more customers and create more resources. 

⮚ Powerful Human Resource -The biggest asset any company can hold is its employees. A skilled and effective stall generates a lot of profit for the company. Therefore in mergers and acquisitions, the human resources of both companies are pooled together. 

⮚ Better infrastructure and Fixed Capital -In mergers and acquisitions the resources of both companies are shared which means access to better infrastructure for the poor company. Big machines and other resources can also be used up for better production. 

Mergers and acquisitions in the telecom industry in India 

Introduction  .

India is currently ranked as the world’s second-largest telecommunications market with more than 1.20 billion subscribers and has shown strong growth in the past one and a half decades. 

The Indian telecom industry is growing at a rapid pace. In 2020-2021 the telecom industry contributed 6% to India’s Gross Domestic Product (GDP). The telecom  sector is set to grow at a Compound Annual Growth Rate (CAGR) of 9.4% from  

2020 to 2025. However, with a CAGR of 15.9% throughout the forecast period, the smartphone industry in India will have the fastest growth. By 2025, India’s digital economy will be worth $ 1 trillion. 

The industry has increased primarily due to favorable regulatory conditions, low prices, increased accessibility, and the introduction of Mobile Number Portability  (MNP), expanding 3G and 4G coverage, and changing subscriber consumption patterns. The deregulation of Foreign Direct Investment (FDI) rules has made the telecom sector one of the fastest-growing sectors in the country and a huge means of employment opportunity generator in the country too.

The subsectors of the telecommunication sector include infrastructure, equipment,  Mobile Virtual Network Operators (MNVO), white space spectrum, 5G, telephone service providers, and broadband. 

It is predicted that 5G technology will boost the Indian economy by $ 450 Bn between 2023 and 2040. According to the Global System for Mobile  Communications (GSMA), there is an excellent opportunity for investment in this sector as India will have almost one billion installed smartphones by 2025 and 920  million unique mobile customers, including 88 million 5G connections. 

Importance of the telecom industry  

The importance of the telecommunication industry is highlighted by the fact that it enables global communication. The relevance of this industry has increased significantly after the pandemic. Services offered by this industry are more frequently used since it allows for a continued virtual connection. The smartphone market will continue to increase as more people are expected to purchase them in the coming years. Given that government reforms have eliminated ambiguity and risks and established a stable investment environment, India’s telecom sector is projected to receive investments totaling $ 25.2 Bn over the next two years. 

Mergers and acquisitions in the telecom industry  

The recent trend of mergers and acquisitions can be widely seen in the telecom sector too. This recent trend in the world of the telecommunications market has been caused by the ongoing regulatory liberalization and privatization of the industry.  These changes have brought about fierce competition and ensuing decreases in profit in both the domestic and international telecommunications service markets. 

Mergers and acquisitions in the telecom sector are considered to be horizontal mergers because both companies deal in the same line of business. In the majority of developed and developing countries, mergers and acquisitions in the telecommunications sector have increased which also resulted in the creation of jobs. 

The legal Framework of Mergers and Acquisitions in the telecom sector  

• ⮚ National Telecom Policy formed in 2012 hasimplifiedde M&A in Telecom  Service Sect, ensuring adequate competition and allowing  100% FDI.
• ⮚ The merger in the case of licenses shall be done for the respective service category. Access to service license allows the provision of internet service and so the merger of ISP license with services license shall also be  
• permitted. 
• ⮚ In a service area, the market share of the merged entity should not be more than 50%. If it is more, it has to reduce it below 50% in an annum. 
• ⮚ The total spectrum held by the merged entity should not be more than 50%  in a service area. If it is excess, it has to be surrendered within an annum. 
• ⮚ The corporation which acquires will have to pay the difference between the market price determined in the auction & the administrative price if an acquired company has got spectrum after paying the administrative price. 
• ⮚ If due to a merger or transfer of license in any service area business,  corporation or entity becomes an important market power, then TRAI’s  Telecommunication Act of the year 2002 will come into place. 

Case study – Merger of Vodafone and Idea 

History of both the companies  .

History of the merger  

In March 2017, it was announced that Idea Cellular and Vodafone India would merge. The merger got approval from the Department of Telecommunications in July 2018. On 30 August 2018, National Company Law Tribunal gave the final nod to the Vodafone-Idea merger. It was completed on 31 August 2018, and the new entity was named Vodafone Idea Limited. Under the terms of the deal, the  

Vodafone Group held a 45.2% stake in the combined entity, the Aditya Birla  Group held 26% and the remaining shares were to be held by the public. 

Reasons for Merger of Vodafone and Idea   

Dominance over the market by JIO- The main reason for the merger of Vodafone and the idea was the dominance of the Jio company. The companies saw a major downfall as Jio announced free internet services for the first 6 months. As a result price war began between companies. the companies began to see losses, and as a result, a merger between Vodafone and Idea happened. 

Key takeaways  

• ⮚ Under the plan submitted to Indian regulators, Vodafone will initially hold a  50 0% stake in the combined entity, while the Aditya Birla Group and public shareholders will hold 21.1% and 28.9%, respectively. Vodafone will then divest a 4.9% stake to the Aditya Birla Group, which would increase the latter’s stake from 21.1% to 26%, thus crossing the threshold for an open offer. 
• ⮚ Vodafone and Idea had individual spectrum holdings of 411 MHz and 316  MHz respectively. The amalgamation of the companies would give, it was expected, the merged company a hold of 728 Mhz increasing the chances of the merged company to rank number one or two in India. 
• ⮚ The merger ratio was 1:1. This ratio was based on the price of Idea at 72.5  per unit. Implied enterprise value for Idea and Vodafone was INR 72  thousand crores and INR 82 thousand and 8 hundred crores respectively.  The agreement had a break fee of Rs 3,300 crore payable upon certain conditions. 
• ⮚ Aditya Birla also has the right to acquire up to 9.5% additional shareholding from Vodafone Group throughout three years post-closure of the deal for an agreed price of INR 130 per share. But these rights by Aditya Group will be exercised based on the growth achieved and the market price of the combined entity .
• ⮚ Idea and Vodafone will have joint control over the appointment of CEO and  COO, the exclusive rights to appoint a CFO is with Vodafone. So Vodafone is not just a major shareholder but also has more financial rights. 
• ⮚ If at the end of 3 years, Aditya Birla Group fails to purchase any stakeout of the additional stake of 9.5%, then they will be given the last opportunity to purchase the stake at the prevailing market price for share equalization. 
• ⮚ Vodafone contributed net debt of Rs 55,200 crore to the merged entity,  whereas Idea contributed Rs. 52,700 crore. Vodafone contributed net debt of Rs. 2,500 crore more than Idea . 
• ⮚ In September 2020, Vodafone – Idea rebranded itself. The company used the initials to rebrand itself as ‘Vi’. The rebranding took place after almost two years of the merger, however, it shows the spirit of integration. 
• ⮚ In the financial year 2022, Vodafone Idea Limited earned revenue of 386.5  billion Indian rupees.

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Home » Management Case Studies » Case Study on Vodafone’s Re-Branding Strategies in India: Hutch to Vodafone

Case Study on Vodafone’s Re-Branding Strategies in India: Hutch to Vodafone

Launch of Vodafone Essar

Vodafone is the world’s leading international mobile communications company. It presently has operations in 25 countries across 5 continents and 40 partner networks with over 200 million customers worldwide. Vodafone has partnered with the Essar Group as its principal joint venture partner for the Indian market. The Essar Group is a diversified business corporation with interests spanning the manufacturing and service sectors like Steel, Energy, Power, Communications, Shipping & Logistics and Construction. The Group has an asset base of over Rs.400 billion and employs over 20,000 people.

Vodafone Essar was launched in India on 21st September 2007. Vodafone was welcomed in India with the “Hutch is now Vodafone” campaign. The popular and endearing brand Hutch was transitioned to Vodafone across India. This marked a significant chapter in the evolution of Vodafone as a dynamic and ever-growing brand. This brand unveiled nationally through a high profile campaign covering all important media.

Vodafone, the world’s leading mobile telecommunication company, completed the acquisition of Hutchison Essar in May 2007 and the company was formally renamed Vodafone Essar in July 2007. The transition from Hutch to Vodafone is probably the largest brand change ever undertaken in this country and arguably as big as any in the world. It is even larger than Hutch’s own previous brand transitions. The migration from Hutch to Vodafone was one of the fastest and most comprehensive brand transitions in the history of the Vodafone Group, with 400,000 multi brand outlets, over 350 Vodafone stores, over 1,000 mini stores, over 35 mobile stores and over 3,000 touch-points rebranded in two months, with 60% completed within 48 hours of the launch.

Vodafone’s Marketing Strategies: Hutch to Vodafone

Vodafone’s new advertising campaign in India carried on with the same popular pug that has become a brand ambassador for Hutch. ‘Where ever you go, our network follows,’ was the previous slogan with the pug following the child wherever he goes. Now, with Hutchison Essar becoming part of the Vodafone Group, the new campaign had started with Vodafone Essar earmarking Rs. 2.5 billion on the transition from Hutch to Vodafone. The main message of the brand transition exercise: The new Vodafone is the same old Hutch. In the advertisement, the pug sees a new home when it returns after an outing and feels the change is better. The new catch phrase will be ‘Make the most of now.’

Conventionally awareness for a new brand takes some time to build. However, Vodafone wanted to achieve this task at the shortest possible time. Hence, Maxus and Star Network worked closely to address this challenge and came up with the idea wherein during the day of the launch a complete roadblock on the Star Network channels was conceptualized. Considering that the Star Network is the lead network in India, this was the most apt platform for Vodafone launch. This strategy helped not only in achieving build rapid brand awareness but also breaks the clutter during such an important launch in the most happening category – telecom. This is a first of its kind mega media initiative in India by any brand. While the campaign was heavy on television, it also included all other media vehicles. The print campaign kicked off on 21 September, a day after the television splash.

While the brand campaign had been addressing the transformation, the Company, on the other hand was swiftly preparing for a price war in the Indian telecom space. Indeed, it was preparing to provide mobile handsets to new subscribers at ultra-cheap prices, ranging from about $19 to $25.

Previously, similar handset-driven expansion strategies to grow subscriber bases were adopted by CDMA players, like RCOM and Tata Teleservices. Vodafone is the first GSM operator to follow suit.

The Vodafone mission is to be the communications leader in an increasingly connected world – enriching customers’ lives, helping individuals, businesses and communities be more connected by delivering their total communication needs. Vodafone’s logo is a representation of that belief – The start of a new conversation, a trigger, a catalyst, a mark of true pioneering.

Advertising is probably one of the most frequently used vehicles for Rebranding, as it is fairly easy, flexible and quick to change. It is a powerful way of reaching a broad or targeted audience quickly and is effective at signalling a change in positioning, however real or broad that may be. There are many examples of where advertising has either repositioned or strengthened brands, other good examples of where advertising has built a new position for a brand or built a strong emotional link with the public are where companies have created a sort of soap opera out of their advertising.

The Advertising agency of Hutch and now Vodafone, Ogilvy & Mather (O&M), had a two-fold task to achieve: announce the entry of Vodafone into India and highlight the metamorphosis of Hutch into Vodafone. O&M realised that they had a fantastic property in the Hutch pug, which they had been using for about five years. Therefore, to show the transition from Hutch to Vodafone, O&M launched a rather direct, thematic ad showing the trademark pug in a garden, moving out of a pink coloured kennel which symbolised Hutch making his way into a red one that is the Vodafone colour. A more energetic, chirpier version of the ‘You and I’ tune associated with Hutch was played towards the end, and it concludes with ‘Change is good. Hutch is now Vodafone’.

Four other ads with the pug did the rounds of telly screens. These five and 10 second spots cast the dog in situations where he, literally, saw red, using the colour as a visual mnemonic to remember the brand by. The pug was shown in a red basket, popping up from a red cart, drying himself on a red mat, and hiding in a red blanket. Each of these made use of the ‘Hutch is now Vodafone’ tagline.

The print ads, in all major languages in several leading dailies, were kept unbelievably simple: a still shot of the pug inside a red kennel. The same creative was used in outdoor hoardings as well, in all the 16 circles in which Vodafone now operates.

A few advertisements include:

• Hutch is now Vodafone: If you watch any of the star channels or tuned into 20-20 world cup, you would have seen this ad. On 11 February 2007, Vodafone agreed to acquire the controlling interest of 67% held by Cheung Kong Holdings in Hutch-Essar for US$11.1 billion and now had to rebrand itself so it has decided to run a new ad series which piggy banked on Hutch’s dog mascot and the theme “Change is Good”. This required nearly 250 crores of spending by Vodafone but they have successfully painted the town red. An interesting part of this campaign was on the opening day roadblock where they made a deal with Star India so that besides them no other commercials were aired (apart from in-channel promos) on the Star India’s channels for 24 hours.
• Vodafone Valentine Day Special Ads: Vodafone had released a simple and sweet ad for musical greetings targeted at couples during the valentine week the feature of this campaign is its simplicity and believability and is quite well received. It uses the positioning “Make the most of now” enjoy the video
• Vodafone Chota Credit Ink Ad: This new ad had come as refreshing change and more so that this ad takes a very refreshing look at school and at fountain pens. This ad creates a wonderfully subtle message which really puts the point of chota (small) credit across.

Related posts:

• Case Study: L’Oreal Marketing Strategies in India
• Case Study on MNC’s Marketing Strategies: In India, it’s a Brand New Way
• Case Study: Failure of Vodafone in Japan
• Case Study: Advertising Strategies of The Times of India
• Case Study: McDonald’s Business Strategies in India
• Case Study: L’Oreal Global Branding Strategy
• Case Study of GUCCI: Transformation of Luxury Branding
• Corporate Branding Case Study: ‘Power of Dreams’ Campaign by Honda
• Case Study: Coffee Cafe Business in India
• Case Study of Maggi: Brand Extension and Repositioning in India

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