Vodafone-Idea collaboration, Vi- Together for Tomorrow

  • Ritesh Pathak
  • Sep 19, 2020
  • Business Analytics
Vodafone-Idea collaboration, Vi- Together for Tomorrow title banner

The Indian market is dynamic. It keeps changing and hence forces the businesses to change themselves. Entering the market is very easy for any business but to sustain the blows and retain your position is the major challenge. India is still a developing economy and its market is open to everyone.

 

Companies from different parts of the world enjoy the benefit of investment in Indian markets. The market of telecom companies has expanded in the past few years. Technological developments have also benefited these companies. Big names in the telecommunications industry, before Reliance's Jio, came into existence, were Airtel, Vodafone, Idea Cellular, Aircel. But ever since Jio came with better plans and large spread network, these companies started witnessing a decline or better say migration in their customers. 

 

To sustain the blows and retain the market, they needed to come up with better plans. Airtel managed to tackle the challenges posed but for companies like Idea Cellular, and Vodafone, which did not have big market size like Airtel, survival became a question. There had been a tradition of collaborations among businesses.

 

Similar happened with Idea and Vodafone. They shook hands and tried to pose a challenge before Jio and Airtel too. Through this article, we have tried to explain the market conditions of these two telecom companies and how the talks of collaboration started. Also, why did it take so long to come up with a new logo? We have tried to understand their approach and its scope in the future. 

 

 

A brief history of both companies

 

Vodafone India was an Indian deputy of the British multinational telecommunications company Vodafone Group plc. It operated services in India from its Mumbai based head office. Vodafone earlier operated under the name Hutch. Actually, before 2007 when Hutchison Essar Limited entered a binding agreement with a subsidiary of Vodafone Group plc, they operated under the name Hutch. Hutchison Essar Limited had renamed themselves with the same in 2005. Before that, they were Hutchison Max Telecom Ltd. (HTML). They were awarded the license to operate in the Mumbai circle by the Department of Telecommunications (DoT) in 1994. They entered the telecom circle Delhi in 1999, Gujarat and Kolkata in 2000, and by 2006 Hutchison Max had acquired interests in all 23 telecom circles of India. 

 

Idea Cellular Limited was an Indian mobile network operator. They also had their head office in Mumbai. Idea Cellular was incorporated as Birla Communications Limited in 1995 after they won the GSM license in Gujarat and Maharashtra circle. The company renamed itself to Idea Cellular after a series of name changes. It branded itself as Idea after mergers and joint ventures with Grasim Industries, AT&T Corporation, and Tata Group. AT&T Corporation and Tata Group parted ways with Idea Cellular in 2004 and 2006 respectively. Thus Idea Cellular became a subsidiary of Aditya Birla Group. Axiata, a Malaysia based firm bought a 20% stake in the company in 2008. 

 

 

Individual market situation

 

Vodafone India had a vast market as compared to Idea Cellular. Even after Reliance's, Jio came into the market, Vodafone India was retaining its position. As per an article published in economic times, in March 2018, Vodafone India had a market share of 21% which was second most after Bharti Airtel, which acquired 32%. However, this was not enough as with time elapsing and Jio capturing the telecom market, Vodafone India lost its customers. 

 

While when we talk about Idea Cellular, in June 2018, Idea had 220 million subscribers. In the list of telecom companies, which we mention above, Idea Cellular was behind Jio, which had launched 19 months ago, with a slump of 16.5% in its RMS.

 

So, looking at the market situation and Jio continuously hurrying towards the top position, Vodafone India and Idea Cellular decided to come together. 


The image shows the 2 big competitors of Vodafone Idea in the telecom market.

2 big names in the telecom industry


“The unified brand powers our tomorrow together”

-Ravindra Takkar, MD and CEO, Vodafone Idea Ltd.

 

Vodafone-Idea Merger

 

The entry of Jio in 2016 and it's rapidly growing market compelled other telecom companies to come together. It had led to various mergers and consolidations. After one year, in March 2017, Idea Cellular and Vodafone India announced their merger. However, they had not decided to operate as one brand. It took one year to get approval from the Department of Telecommunications (DoT). It approved the merger in July 2018.

 

However, the final nod was yet to come from the National Company Law Tribunal. It came on 30 August 2018. The merger was completed on 31 August 2018, and the final entity was named Vodafone Idea Limited. This merger made them, as of then, the largest company by revenue and also by the number of subscribers. The distribution of stake was not even. Vodafone Group holds a 45.2% stake in the combined entity, and Aditya Birla Group holds 26%. For the remaining stake, it was said that the public will be the owner.  

 

After their mergers, the two brands had decided to operate on different strategies. Vodafone India, as it had always offered, would offer prepaid and postpaid services to the customers while Idea Cellular would have to offer only prepaid services. 

 

After two years of the final merger, the two companies decided to operate under a single brand name. 

 

On 7 September 2020, Vodafone Idea Limited unveiled its new logo and the single brand identity- Vi (pronounced as we). They bashed all the rumors about them being off in India. A strong and bold message was conveyed that they are not going to give up so easily. The company had marked this as a final step in the biggest integration of two telecom brands. 

 

Ravinder Takkar, MD and CEO at Vodafone Idea Limited, said, “Vodafone Idea came together as a merged entity two years ago. We have since then focused on integrating two large networks, our people, and processes. And today I am delighted to present Vi, a brand that will bring important meaning to the lives of our customers. Indians are optimistic and want to get ahead in life. They would love a credible partner to help them on this journey. Vi's positioning is built around this promise and will focus on meeting the customer needs to help them thrive.”

 

Conclusion

 

The merger has been finally completed and both the companies look forward to working integrated. It is being seen as their embankment on becoming the leading telecom company and dislodging Jio off the market. However, it is a big target to aim at as of now. The company is in huge debt and has ten years to clear the dues. There is another competitor that has deeper roots and that is Bharti Airtel. Airtel alone managed to pose a challenge before Jio and is continuously working to retain its position. The world is now looking for 5G connectivity and this Vodafone Idea integration is also determined to be the leader in the Indian telecom market. 

 

Moreover, this fierce competition is going to benefit consumers. A monopoly is never good and it is good that companies are not giving up but rather looking for alternatives to serve their customers better.

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