Business

Sunil Bharti Mittal says culture clashes after Vodafone Idea merger wrecks telecom company


Vodafone and Idea merged power in 2018 to take on other telecom players in the market, but a “culture shock” within the organization made the merger “devastating”, Sunil Bharti Mittal said. He said he warned at the time of the merger that it “won’t work”.

“Vodafone Idea at one time had the biggest market share, was rooted in India and should have been a fabulous company,” the chairman of Bharti Enterprises said at an event at the Confederation of Indian Industry. (CII).

Here’s how Vodafone Idea’s stock performed last year:

Source: BSE

Mittal called Vodafone’s style of operation a “multinational culture”, while he called Idea a promoter-driven business. “Idea used to perform much better in terms of return on capital. The culture clash just didn’t work for Voda Idea,” he said.

Speaking of AGR (Adjusted Gross Income) burden and spectrum issues, Mittal said, “We are now at two and a half players for a big country like India.” Jio is another player in the telecommunications space.

In September 2020, the Supreme Court had asked telcos to pay AGR dues in 10 installments ending in 2031. Mittal said AGR dues of nearly $6.5 billion were “backbreaking.” He added that the burden, which was worse for Vodafone Idea, was crippling them.

The Vodafone Idea merger was finalized on August 30, 2018, having received the final green light from the National Company Law Tribunal (NCLT) the day before.

Vodafone Idea revenues since 2018 (after merger):

Year Turnover (in cr)
2018 27,828.60
2019 36,858.80
2020 44,715.00
2021 41,672.70
2022 38,220.70

Commenting on Vodafone Idea’s difficulty in raising funds, Mittal said: “For two years Vodafone Idea has been talking about raising funds, but nothing has materialized so far.”

Disclosure: RIL, the developer of Reliance Jio, also controls Network18, the parent company of CNBCTV18.com.

First post: STI


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