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Reliance Jio threat: India not a Jio market alone, says Vodafone CEO Colao

Dev Chatterjee/ 21 Mar 17 | 08:14 AM

Aditya Birla Group Chairman Kumar Mangalam Birla (left) and Vodafone Group CEO Vittorio Colao, at a press conference to announce the merger of the two telecom majors, in Mumbai on Monday Photo: Kamlesh Pednekar

Soon after announcing the $23-billion merger between Idea Cellular and Vodafone Group Plc, the latter’s Chief Executive Officer Vittorio Colao and Aditya Birla Group Chairman Kumar Mangalam Birla spoke to Dev Chatterjee on the rationale, the road ahead for the merged entity and the negative reaction of Idea shareholders. Edited excerpts:

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The entry of Reliance Jio has changed the telecom landscape, leading to consolidation in the sector, with Bharti Airtel buying out Telenor and now Vodafone and Idea merging their operations. Do you agree with this assessment?

Colao: You always talk about Jio. But, what about Bharti Airtel? They are the market leader and a very strong and much bigger player. This is not a Jio market alone. This is a very competitive market and would continue to remain so. There would be more choice for the customers as we go together, over time, as companies that are very complementary but have a different geographic focus and spectrum will go together. We will be present in all circles except J&K and there will not be a single circle where our market share would be lower than 10 per cent.

The shareholders of Idea have not reacted positively to the transaction. The stock is down 9.5 per cent since you made the announcement in the morning on Monday. Do you think the investors have not understood the benefits?

Birla: I think there is some miscommunication about the price at which the Aditya Birla group would buy shares of Idea from Vodafone. Based on my experience, I have realised that when you have such a large and complex transaction, it takes the markets some time to grasp it. If the management has taken hundreds of hours to effect a scheme like this, it would certainly take the markets some time to understand the transaction. Today’s (Monday’s) stock correction is only a knee-jerk reaction. 

Then, how do you sell this transaction to Idea shareholders?

Birla: Just look at the numbers of the merged entity. We have compatibility in assets. Vodafone is a dominant player in metro cities, while Idea is a big player in urban and semi-urban markets. The revenue market share of the combined entity would be more than 40 per cent. The combined customer share of the new entity would be over 30 per cent. We hope to play a more aggressive and much more significant role in participating in Prime Minister Narendra Modi’s Digital India vision.

Vodafone once said India was a jewel in its portfolio… what do you say about India now?

Colao: It’s a bigger jewel and a much bigger crown now for Vodafone. India has been wonderful for Vodafone in terms of market, brand and the customer point of view. It has not been very good in other ways, as spectrum has been oversold and prices are too high. Competition rules were managed in a very erratic way. But, the situation is getting better. We will have five players with long-term points of view, with all of us having a lot of spectrum and a lot of capacity. Vodafone would continue to invest in India and we are not exiting India. 

Vodafone has an income tax demand on its acquisition of the Hutch stake. Do you think this transaction would be impacted by this in any way?

Colao: This transaction will not be impacted in any way by this. The tax demand is made to Vodafone Group Plc and the matter is currently under arbitration overseas.

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