Abstract

The case study ‘Organizational Redesign at Vodafone Idea Limited’ focuses on the integration efforts undertaken following the merger between Idea Cellular (Idea) and Vodafone India (Vodafone) in August 2018 that resulted in the formation of Vodafone India Limited (VIL). In 2017, the Indian mobile industry witnessed hyper competition with the entry of Reliance Jio Infocomm Limited (Jio) that offered extremely low priced plans. To face the onslaught from Jio, the existing telecom operators went into consolidation mode. Idea and Vodafone decided to come together and announced a merger agreement on March 20, 2017. VIL focused on accelerated integration with a very clearly defined five-pillar strategy – (i) accelerate execution integration (ii) prioritize investment in terms of profitable areas, (iii) drive average revenue per user (ARPU) up with simplification and upselling, (iv) focus on partnerships to drive value, and (v) strengthen the balance sheet. This formed the blueprint under which several strategic initiatives were taken to improve its revenue, profitability, and competitive position in the marketplace. One of the key steps taken was to revamp the organization structure and culture of VIL on the basis of the newly created vision, mission, and values. The company implemented the new structure which comprised 5 bands (M1 to M5) and a set of corresponding designation prefixes across the company effective from June 2019. VIL also set about evolving a common work ethic and culture to ensure that the merged entity focused on the smooth functioning of the organization. Despite the restructuring efforts and its efficiencies, VIL’s market cap fell by more than 20% (over INR60 billion) and its share price by 81% following the merger, which closed on August 31, 2018. It reported a net loss of INR48.73 billion, its third successive quarterly loss since the merger. Revenue had declined 4.3% sequentially to INR112.69 billion, falling below Jio’s revenue for the first time in the same period. Debt was INR993 billion as of June end 2019. On August 19, 2019, VIL CEO Balesh Sharma (Sharma) announced his resignation citing personal reasons. He had served as CEO for just under a year. Ravinder Takkar (Takkar) took charge of operations as CEO and MD on the very day of Sharma’s resignation. Takkar’s top priority was to reverse the revenue decline.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Gain awareness of recent changes in the Indian telecom market following the entry of Reliance Jio.
• Understand the issues and challenges faced by VIL’s management.
• Understand the importance of culture for the success of a newly combined organization.
• Understand the rationale behind the merger of Idea and Vodafone that gave rise to VIL.
• Learn about the organization structure and its importance in strategic planning.

Keywords

Idea Cellular; Vodafone India Limited; Vodafone Idea Limited, Merger; Telecom sector; Leadership; Organizational redesign; Customer-Centric structure; Corporate strategy; Integration; employee communication; Flat structure; Company Mission.