Vodafone is now the largest telecom service provider in India after its merger with Idea Cellular. Today is the first time they are going to publish their quarterly reports since their inception. Experts claim that they are headed for huge losses owing to low subscriber addition rate and high 4G network expansion cost. Indian telecom market has been disrupted in the past 2 years after the advent of Reliance Jio in the country. It has resulted in numerous players to be ousted from the market. The major players that did not get ousted had to look for other options to stay in business. Mergers and acquisitions were the most viable options.
Airtel and Jio were the two largest players in India until a month ago. However, Vodafone, the UK based player and India’s Idea Cellular came together to become Vodafone Idea. During the merger, they separately lost around 2.6 million and 4 million subscribers respectively. This was due to the poor network quality and service disruptions caused by the merger process. However, the new entity, Vodafone Idea is currently the biggest player in the Indian market with over 400 million subscribers.
Airtel was the largest player already but they faced a stiff competition from the newcomer Jio. They had to acquire the Japanese telecom player in India, Docomo, to gain a little market share and cut down on costs too on acquiring new subscribers.
Telecom players have been in a fierce competition for survival due to the disruption caused by Jio. The cheap data rates and almost free voice calls resulted in the companies to be cutting costs wherever possible. Most of the big companies were facing huge losses and feared that they might go out of business if they kept competing with the deep-pocketed Reliance Industries. Indian telecom sector needed a necessary step towards retaining their position in the market and then started the infamous mergers and acquisitions.
Mergers and Acquisitions result in numerous duplication of roles in the newly formed entity. Job cuts have been rampant and numerous employees from both the older entities have been let go of. According to research firms, there have been around 50,000 to 75,000 job losses directly. If the indirect jobs are considered that were dependent on the telecom sector, it would cross the 150,000 marks. However, it is not just Mergers and Acquisitions; automation is another huge reason for job cuts in this sector. As technology is getting more and more advanced, the need for human interference is reducing significantly. It is expected that the shrink in the jobs in the telecom sector will be less in 2019 but will still be around 5-10%.
It should also be noted that most of the jobs that have been laid are from low-end contractual basis employees whereas the mid-level managerial level jobs are far more secure. Jio has been the largest employer out of all the players and in the upcoming days, the mobile phone, accessories and telecom equipment manufacturers will be employing a huge number of people.
Despite the presence of different telecom service providers in India, the majority of them are served by the Chinese telecom gear manufacturers, Huawei and ZTE. In an attempt to reduce the dependence on the Chinese manufacturers, Vodafone Idea is renegotiating its terms. Currently, they have 3 vendors per circle but they want to bring it down to only 1 vendor per circle. This way, the merged companies will be able to declutter their vendor agreements and focus more on customer acquisition and so on.
The new entity needs some time in the Indian market to hold its ground and perform at its optimum level. The competition is not going to relax anytime soon but the company needs to take steps that are strategically right. It also needs to keep changing with the changing times and use innovative ideas to remain functional in the market.