Vodafone Idea, the company formed out of the merger of the former No.2 and No.3 telecom operators in India, said it will eliminate around 16,000 distributors, close over 2,000 branded stores in urban areas and slash the number of call centers by more than half.
The moves are aimed at reducing operating costs and helping the loss-making company overcome severe financial stress caused by the entry of low-cost telecom operator Reliance Jio in to the Indian market.
Jio’s entry has slashed data prices in India’s mobile sector by over 90% and voice realizations by more than 50% in the last two years.
Vodafone Idea reported a loss of Rs 4,973 cr for the three months ended September, hit by a steep decline in pricing and revenue even as costs remained high.
The two companies had decided to come together last year in an effort to pool their resources and reduce costs by taking advantage of a higher scale of operations.
The companies hope to save around Rs 11,000 cr per year by merging their network operations and another Rs 1,200 cr by merging their sales, service and marketing infrastructure.
The two have extensive overlaps in their sales and service footprint and have brand stores close by in many towns and cities.
The company aims to unify its distribution and retail infrastructure instead of maintaining separate channels for its two brands, Idea and Vodafone, said Chief Operations Officer Ambrish Jain.
As a part of the rationalization, the total number of Vodafone and Idea stores in urban areas will be brought down from around 6,000 at present to less than 4,000 by March.
Similarly, the total number of distributors will be brought down from 43,000 to 27,000 by next month.
On the back-end, the number of call centers will be reduced from 82 as of August to 38 by March.
The company will also reduce the number of prepaid recharges and plans that it offers from more than 100 to just five in an effort to reduce customer complaints, bringing down the need for a large army of help desk personnel and contact centers.
Speaking to investors, Jain said the idea was to bring about distribution consolidation and to close ‘high cost, low quality’ sales channels.
The focus, he said, will be more on digital channels and on acquiring ‘high value customers’.
In addition to these, the company will also try to combine its advertising and business promotion activities, though it is not clear how it plans to do that, given that it is trying to promote both brands.
While Idea will be positioned as a value for money brand, Vodafone will be focused more on the youth.
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