"The retrenchment has to happen swiftly because, in times of margin pressures in a debt-heavy industry, both companies do not want to start new operations burdened with excess manpower", a senior executive aware of the development told ET.
The Vodafone-Idea merger process may lead to the exit of over 5,000 employees in the next few months, reported The Economic Times.
As per details, both companies are making heavy losses now, and there is major pressure on the revenue front, which combined with an accumulated debt of approximately Rs 1,20,000 crore. It will be tough for those getting the axe to find jobs within a vastly shrunk telecom industry that has already let go of at least one lakh employees. Idea Cellular rival Bharti Airtel was trading flat at Rs 376, down 0.5 per cent on the BSE.
Responding to queries from ET, a Vodafone spokesperson said, "This is pure speculation and totally untrue".
The existing leadership teams of Idea Cellular and Vodafone India will continue to manage their separate businesses and be accountable for each company's operational performance until the merger becomes effective.
Idea Cellular share price dipped marginally even as a news report claimed that as many as 5,000 of 21,000 employees may be sacked by Vodafone-Idea Cellular merged entity.
"Both the companies (Idea and Vodafone) will be asked to clear their dues before merger is taken on record". Cost efficiency will be a key element for the success of the merged entity in a brutally competitive market. The combined entity will be the largest mobile phone operator in India, replacing Bharti Airtel, with nearly 42 percent customer market share and 37 percent revenue market share.
Idea and Vodafone, who have received all clearances for the merger except from the telecom department, now employ roughly 11,000 and 10,000-plus people, respectively and the merged firm could shed about a fourth of the workforce, according to a report in The Economic Times. Both telcos are expected to post meek results for the March end quarter.
The Aditya Birla Group has recently infused Rs3,250 crore into Idea, which will also raise a further Rs3,500 crore via a preferential share issue or a rights issue.
To recall, Idea Cellular and Vodafone Group Plc announced the proposed leadership team of the combined business, that will have Kumar Mangalam Birla as the non-executive Chairman, while Balesh Sharma (currently Chief Operating Officer of Vodafone India) will be the CEO and he will be responsible for the combined business strategy and its execution as well as driving integration.