Balesh Sharma’s exit from Vodafone Idea Ltd (VIL) is an indication of the troubles being faced by the telecom company not just financially but also cultural clashes and turf wars between the employees of the two merged entities.
According to several current executives working in the company, who spoke to BusinessLine on conditions of anonymity, there are serious issues with the merger between Vodafone’s India operations and Aditya Birla Group’s Idea Cellular. “Operationally, the organisation has split into two camps at several levels. Some of the senior executives who came from erstwhile Idea Cellular do not see eye to eye with executives who have brought in from Vodafone India,” said an executive who has been with Idea Cellular for over a decade.
“There is a huge turf war within the merged entity. The merger process has not been managed well by the leadership so one is not surprised that Balesh has quit,” said another executive. “Cultural differences between the two organisation are also exacerbated integration problems. While Idea Cellular has all along been run by an Indian management, Vodafone India’s operations have been run on multi-national corporate processes. There are bound to be differences,” the executive added.
When contacted, company spokesperson said there was no integration issue at all. “This is not true at all. As announced in our Q1FY20 results, integration continues at pace with 10 circles and 66 per cent of districts consolidated in just 10 months of operations. This would not have been possible without functional and people integration. Balesh has overseen the successful integration of Vodafone Idea resulting in the estimated timescale to complete the integration falling from four to just two years,” VIL spokesperson said.
Weak financial situation
Sharma was appointed as the CEO of the merged entity in August 2018. Since then the company’s financial situation has weakened. “VIL’s 1QFY20 earnings print was a shocker. Revenues declined 4.3 per cent quarter-on-quarrer as the minimum recharge construct gains didn’t sustain, and downtrading in the smartphone segment continued. Without a meaningful revenue/EBITDA uplift, the company could run out of its ‘capacity to suffer’ in not too distant a future,” a report from Kotak Institutional Equities had stated on July 29.
Vodafone Idea had reported consolidated loss of ₹4,873.9 crore for the June 2019 quarter. The company’s subscriber base declined to 320 million in the first quarter of this fiscal, from 334.1 million in the fourth quarter of last financial year. Vodafone and Idea Cellular had announced the merger as a means to counter the pressure from Reliance Jio. But even at the time of the merger both Idea and Vodafone were separately reported declining revenues. “We believe VIL’s task remains challenging unless there is a sharp and sustainable revenue jump,” said a report from IIFL.
“In a market where RJio is the player shaping consumer behaviour in the smartphone segment, VIL’s poor reading of consumer behaviour at the low end of the market, VIL’s stronghold, was disappointing. We see inside-out thinking as opposed to an outside-in thinking at play here,” said the Kotak report.
Vodafone Idea chose to downplay Balesh’s exit. It said that Balesh’s was steeping down due to personal reasons.
Kumar Mangalam Birla, Chairman Aditya Birla Group and Vodafone Idea Ltd, said that under Balesh’s leadership, Vodafone Idea has realised a significant proportion of the synergies in a much shorter timescale than originally estimated. “Concerns over sustaining operations are unfounded. Focus is on improving topline and reducing costs. Several measures have been taken. There is normally a few months lag between coverage enhancement and its impact on topline. We are already seeing positive traction in areas where this was done first,” VIL spokesperson said.
While experts say that it is too soon to write-off Vodafone Idea, Ravinder Takkar, currently Vodafone Group’s representative in India, who will be taking over the reigns of Vodafone Idea has a massive challenge in front of him.
Source: The Hindu