Vodafone-Idea Merger

Case Statement:

Idea and Vodafone both had 2 million customers each that subscribed to their platforms. They merged their platforms in year X. Until now, which is not a very large timespan, you can assume less than 5 years, they are on the verge of bankruptcy. Despite having a merged subscriber base initially which was close to 450 million people, they are now down to 250 million and people keep leaving their platform for Jio every single day. The government has levied a fee of say around 10 billion on them for different issues which they have to clear come what may, and the customer erosion does not seem to stop any time soon. They cannot appeal for bankruptcy because they have an ongoing case in Supreme Court that disallow them from doing so. Because of Jio’s undercutting of prices, they cannot charge their existing customers to raise money. What are your considerations on this scenario?

BCG

M&A

Miscellaneous

Moderate

C: Can I know why was it failing initially?

I: The network quality is very bad, and they were facing marketing issue too. Why do you think this would have been the case?

C: Bankruptcy would have hit them cyclically. Because of bad network they were not getting subscribers and the lack of subscribers meant they had a low marketing budget and could not invest in making their network better.

I: Right, move on.

C: Post merger, were there any changes in the way operations were carried out, with respect to people policies, processes followed, technology used?

I: Not quite, no. everything was retained just like before.

C: Since you mention that everything was retained just like it was pre-merger, do we know the structure of the new leadership?

I: So, we have 2 CEOs now, one of each company. The exact hierarchies of the individual companies are followed in their respective vertical.

C: This seems to be an issue. Do we know the extent of cultural alignment of the two organizations post-merger?

I: It is a complete mismatch. Vodafone employees like to maintain a good work life balance and leave work at 5 pm daily, while Idea employees feel like they are having to shoulder the load of the employees who are leaving early.

Can you summarize your findings to me?

C: Sure, There are 3 broad issues that the Vodafone Idea merger is facing:

1) Lack of money – because of which they are unable to ensure 2 things:

i) better network quality as compared to competitors like Jio

ii) better marketing campaigns to capture new customers

As a result, they are losing customers.

2) Lack of leadership – There seems to be no coherent leadership structure, thus there is no one to define a common goal or plan of action

3) Lack of cultural synergy in the organization

I: Sounds fair, which of these would you go about solving first, assume you have all the control and resources?

C: I would solve the 2nd problem (lack of leadership) first, as that would require less time to solve and also be the crux of solving the other two issues. Thereafter, I would focus on building synergy within the organization, and once that is achieved at a considerable level, I would like the organization to devote time, energy and resources to solving the first problem of building better network quality and focusing on marketing.

I: Thank you, we can end the case here.

Background Information:

Client: VI

Customer: Network Subscribers

Competitor: Jio majorly

Product: Network provider

Case tips:

This was not a conventional market entry case but following the M&A structure would help.

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