MUMBAI/KOLKATA: An unforeseen delay in closure of Vodafone India-Idea Cellular merger could disrupt operations of the two companies in transition, leading to customer and revenue losses and even potential HR complications, industry experts said.Final closure of the merger — announced more than a year ago in March 2017 — to create India’s largest telco could take at least a month from date of conditional clearance by the department of telecom (DoT), which is expected early next week, industry insiders said. That is because the department’s cumulative demand for dues — expected to be more than Rs 11,000 crore — could end up being fought in court, they said.“Even a couple of months delay in the merger closure could see the combined entity suffering a 150 basis points (bps) reduction in RMS (revenue market share), which means it stands to lose Rs 600-1,000 crore revenue share for every twomonth delay,” said Naveen Kulkarni, telecoms analyst at PhillipCapital.Vodafone and Idea also run the risk of losing key customers and RMS to rivals Bharti Airtel and Reliance Jio, as scaling up of network quality and go-tomarket strategies will also get proportionately pushed back with the delay in the merger closure, Kulkarni said.Vodafone and Kumar Birla-led Idea had expected the merger to close by June-end, and at least one senior executive in one of the merging firms suspects some foul play. “The delay in merger closure is an unforeseen spanner. It may have been triggered by third-party vested interest,” a senior executive of one of the two merging entities told ET, but declined to elaborate. Another executive, however, downplayed the impact of the delay, saying both the Vodafone and Aditya Birla group are well versed in successfully pulling off mega mergers, and some delay wouldn’t hurt much.UK’s Vodafone and Aditya Birla Group did not reply to ET’s queries as of press time Friday.Experts said delay would hold up critical unlocking of an estimated $10 billion of cost and capex synergies that the future Vodafone-Idea merged entity needs to stay competitive on the 4G front where Jio and Airtel have taken the lead.DoT is in the process of raising combined dues for one-time spectrum charges worth over Rs 11,000 crore, a fifth of which will be for Idea.64801590

While Idea is likely to be asked to produce a bank guarantee, Vodafone would likely need to pay in cash since it won’t exist as an entity after merging with Idea. Vodafone and Idea “need to weigh the costs of the merger getting delayed versus producing the additional bank guarantees (BGs) that the government may seek as a pre-condition to clearance”, said Kulkarni of PhillipCapital.Rajan Mathews, director general of Cellular Operators Association of India (COAI), said the delay would hinder operations integration of both companies, and they won’t be able to optimise their combined spectrum holdings.The delay could also lead to HR issues as a sizeable chunk of executives who won’t be part of the combined entity may need to be retained for an indefinite span to keep the companies running pre-merger, said analysts and experts.“Asking people who’ve been fired to stay back indefinitely to meet immediate business-as-usual goals could lead to motivational issues and impact customer-facing functions such as sales, marketing and customer care that could make customer retention a challenge for both entities, pre-merger,” said Rohan Dhamija, head of India & Middle East at consulting firm Analysys Mason.A senior recruiter aware of developments said, “There is no real work happening at Vodafone and Idea — and key functions like sales, customer care are nearly at a standstill.”A Ramachandran, senior partner at search firm EMA Partners, said the delay in merger closure would definitely have an impact on the productivity of both Idea and Vodafone.The two are reckoned to see about a fourth of combined 21,000-strong workforce lose jobs in the run-up to the merger as they try to save on costs, eliminate duplication and boost efficiency.According to the merger plan, Vodafone will initially own a shade over 45% stake in the combined entity with the Aditya Birla Group owning 26%. But both will have equal ownership rights .