Although it will save them USD 10 billion, integrating operations of Vodafone and Idea will cost the combined entity around Rs 13,400 crore, a top official of the Aditya Birla Group company said today. “The integration cost accounted in the net synergy is estimated to be nearly Rs 13,400 crore from the completion until the first full year of operations,” Idea managing director Himanshu Kapania told analysts. He was addressing the analysts after Idea decided to merge its operations with the British telecom giant’s local unit to create the largest telco in the country with a combined valuation of USD 23.2 billion.
He said the synergies leading to cost saving will result in a net benefit of USD 10 billion for the merged entity, after accounting for the impact of integration costs and shedding spectrum in select circles, where it will be breaching the single-band caps.
Kapania made a fervent appeal to do away with the caps and instead focus on customer experience. “Archaic telecom policies like spectrum caps need to be reviewed. The focus of the department of telecom should shift to customer experience. Band-specific spectrum caps should be removed,” he said.
He said 60 per cent of the cost savings will come from the operational side, including the network where he said at least 20 per cent of the cell sites are co-located.
There will also be savings arising from a change in age profile of the sites which leads to lowering of fuel costs, joint customer acquisition, information technology and also branding and advertising expenses, Kapania said. On the capital expenditure front, the savings will arise from the network and also rationalisation of the broadband equipment, he said. “We expect to develop common IT system for combined entity and larger scale to drive cost efficiency,” he said.
A lot of study has gone into arriving at the cost synergies, he said, asserting that there are slim chances of it going wrong. “Synergy calculations have been done with a lot of detail working and the team is highly confident to achieve the numbers,” said the MD of Idea, whose role in the new company is unknown.
The largest area of synergy will be in the network, followed by IT spends, he added.