COMPANY BACKGROUND

Vodafone India is a subsidiary of London-based Vodafone Group Plc, the second largest mobile phone company in the world. Vodafone entered the Indian market in
2007 by acquiring a 67% stake in Hutchison Essar for $10.7 billion. The business was owned by Hutchison Whampoa Ltd and Essar was a minority stakeholder.
The company was renamed as Vodafone Essar and 'Hutch' was rebranded to 'Vodafone’. Vodafone had a right

of first offer (ROFR) vis-à-vis Essar, which it exercised in 2001 to buy out Essar’s 33% stake for $5.46 billion. Vodafone acquired 74% shareholding,
which was later increased to 100% by 2014. The 2007 deal, which secured Vodafone’s entry into the Indian market, is embroiled in a tax dispute. Vodafone faces
the grim prospect of having to meet a huge bill of about ₹14,000 crore, were it to lose the arbitral challenge to the tax claim

Idea

Idea Cellular Limited is currently the third largest mobile network operator in India. It functioned in its early years as a three-way joint venture involving
the Tata Group, U.S. telecommunications behemoth AT&T, and the Aditya Birla Group (AB Group). Idea was incorporated in 1995 with its registered office in
Ahmadabad. In a decade’s time, the company went public and it was listed in 2007. Idea has been a very successful telecom giant and it has consistently reported
net profits from its services rendered to its 191 million strong subscriber bases. The company posted its first net loss since listing in 2007 in the December
quarter, hurt by the price war following Jio's offerings
Reason for idea and Vodafone merger:

Improved infrastructure to provide superior service:

 The biggest impact of this merger will arguably be seen in the improvement of telecom infrastructure that currently exists in the country.

 Since the entry of Reliance Jio back in 2016, the telecom sector has improved greatly in terms of connectivity. However, quality of service has gone down
drastically. 

 This merger should help Vodafone Idea Limited provide better service in terms of both connectivity and quality. 

 Vodafone Idea Limited, with a wide spectrum portfolio of about 1,850 MHz, and the largest voice network with over 2 lakh GSM towers and about 2.35 lakh kms
of fibre connectivity, should provide "superior voice and broadband connectivity across the country" and cover as much as 92 per cent of the population by
reaching nearly 5,00,000 towns and villages.

Improved tariffs:

 Since its entry into the market in November 2016, Mukesh Ambani-owned Reliance Jio has caused a shake-up that has seen India become one of the most
affordable markets for availing telecom services.

 With billions in the bank to fall back on, Jio started a price war upon its entry that eventually led to mobile tariffs tumbling drastically.

 More than a year from that day, the churn is still in progress, and with Vodafone Idea Limited stepping into the ring, things may just get even better for the end
consumers. 
  Despite the merged entity carrying a debt of thousands of crores, existing customers of Idea and Vodafone can expect to be offered superior services at much
aggressive price points, which would, in turn, see Jio and Airtel indulge the new telecom operator in another round of price cuts and tariff readjustment to fend off
competition.

The fight for the future:

 Apart from providing better services at more affordable tariffs, the merged entity should also help the Indian telecom sector improve adoption of state of the art
technologies, and hasten the move towards the next big thing in telecom, 5G. 

 The mobile broadband space where Reliance Jio with its state of the art 4G Volte network has stolen the march of late will also see the emergence of a new force
with the creation of this new entity. 

 With a broadband network (3G+4G) of over 340,000 sites, Vodafone Idea Limited will cater to a staggering 840 million subscribers across the country and give
Jio and Airtel a good run for their money in the space. 

 However, that's not just where the company plans to stop. With its pooled resources, Vodafone Idea Limited will be better placed to not only improve 4G
connectivity but also upgrade its network to 5G in the years to come. 

Challenges:

 Integration of management of both the organizations will have to cope with cultural differences i.e. staff working with a foreign MNC versus a home-grown firm.
 Vodafone Idea have at least 6 markets –Maharashtra, Gujarat, Kerala, Haryana, Madhya Pradesh and west Bengal where there combined revenue market would
exceed 50% hence they will need to bring

Down its revenue market share below 50% as per M&A rules within a period of one year from the date of consolidation.
  In terms of spectrum limits, the combined entity will exceed the limit of 25% in four circles-namely Gujarat, Haryana, Maharashtra and Kerala this excess
spectrum is needed to be sold to comply with M&A guidelines within one year from the date of merger.

Market response:

Customer response:
Better network coverage, Lower prices, better services

Result:

• Market share dropped just after the merger announcement From 43% to 36.3%
• This explains people were unsure that they will benefit
Much from deal

• Vodafone loyal customers were not happy

Employee response:
NOT HAPPY, Fear of losing jobs were in both companies

Result:

• Number of Employees in Mar-2017 = 21,153

• Number of Employees in June-2019 = 13,520
• So, overall about 7,633 people left or laid off in last 2 years
Corporate Governance

As at the date of this Letter of Offer, there are 12 Directors on our Board
comprising six Non-Executive Directors and six Independent Directors. The
Chairman of our Board, Mr. Kumar Mangalam Birla, is a NonExecutive
Director.

Further, we have one woman Independent Director on our Board. The Board
functions either as a full board or through various committees constituted to
oversee specific functions.

The Company is in compliance with the corporate governance norms prescribed

under the SEBI Listing Regulations and the Companies Act in relation to the
composition of our Board and the constitution of committees thereof.

Board committees:

The Company has constituted the following Board committees in terms of the
SEBI Listing Regulations and the Companies Act:

(a) Audit Committee;

(b) Nomination and Remuneration Committee;

(c) Stakeholders’ Relationship Committee;

(d) CSR Committee; and

(e) Risk Management Committee

CSR:
Vodafone Idea's CSR initiatives are designed to empower people, promote
inclusion and catalyse development.
Their current portfolio focuses on (Education), (Healthcare), (Livelihoods and
Women Empowerment), and they have transformative projects in each of these
domains that offer the potential to improve wellbeing of millions of Indians,
while showcasing innovative use of mobile technology and development
approaches.
They use technology solutions in closing the gap in learning outcomes of
students in low income schools, capacitating teachers, improving access to
education and retention by facilitating scholarships.
The organisation also provides economical diagnostic services in underserved
communities, reduce the gender gap, enhance digital and financial literacy skills
and bring the benefits of mobile connectivity to vulnerable sections of
communities including women, small farmers, youth, etc. Under their CSR
initiatives:
 70 lakh lives were improved annually
 10 lakh students reached out
 3 lakh children were screened for anaemia
 Amplifying infrastructure needs in the society
 4000 villages were positively impacted
 7000 schools were benefitted

ANALYSIS:

 To analyze the financial performance of the sample case during the post-
merger period it has been observed that the company’s turnover during
quarter3 went up by 53.52%.
 EBITDA increased from 461 crores in Q2FY19 to 1136.90 crores in
Q3FY19. EBITDA margin increased from 6.02% to 9.67% during the
same period.
 There has been a decline in profit after tax by –0.56% on account of high
finance cost, integration cost, and mobile tower exit charges.
 Additionally, the major reason for declining profit is due to the intense
competition in the market which is because of the competitive tariff being
offered by Reliance JioInfocomm limited.
 According to the CEO of the merged entity Mr. Balesh Sharma the
company is working well on track to deliver its synergy targets by FY
2021.
 Further, notwithstanding the losses incurred by the company, it is said to
raise Rs11000 crore from Vodafone Group and Aditya Birla group and
 infuse the total Rs 25000 in the firm to ensure that company has sufficient
balance sheet flexibility to successfully execute its strategy.

CONCLUSION:

Reliance Jio is the threat to most of the companies in the telecommunication

industry and to survive in this cutthroat competition mergers and acquisitions
are seen taking place in the industry. In the present case of Vodafone-idea, it
can be said that Synergy benefits would gradually be achieved in the coming
years which will result in higher profits, and leverage is expected to reduce
hence resulting in value addition to the shareholder. As of now, there is no gain
to the public shareholders, it is a loss-making company posting a loss of Rs
5003 crore loss in the December quarter.