Proposed Idea Cellular-Vodafone merger: Experts weigh which brand would prevail

MUMBAI/KOLKATA: So, which brand will survive if the Vodafone India-Idea Cellular talks end up with the intended result: a merger of the two telecoms firms?

Most brand and telecom industry experts ET spoke to pick Vodafone. They see the British brand, identified by the lovable pug and quirky ZooZoos, having a better recall among consumers. Voters for Idea expect the greater hinterland reach to work for it, at a time when the push is to go rural in an industry that is near stagnant in cities.

On Monday, Vodafone said it was in initial stages of discussions with Aditya Birla Group’s Idea Cellular for a cashless deal to merge their operations. Idea said the talks were about a merger of equals.

“Customers and investors are likely to prefer the Vodafone brand to prevail, post-merger, given the British mobile carrier’s global presence and data prowess,” said Bharti Airtel’s former chief executive Sanjay Kapoor.

A top brand consultant said it was highly likely that Vodafone’s “international card” may work better. In merger of equals, two similar-sized companies merge into one, with the investors in both ideally getting similar shareholding and equal control of the combined entity.

When only one of their brands is expected to emerge out of the merger, investors, employees and even customers often want theirs to survive, because of the sentimental value and since it is also seen as an indication of who calls the shots at the merged company. The companies could also combine their brand names. In such cases, the one whose name comes first is often seen as having more influence in the merged company.

If the Vodafone-Idea deal goes through, Vodafone is expected to merge into Idea, which will keep its listing. No further information is available about the terms that the companies are looking at.

Kapoor said given the not-so-elaborate merger talk announcements from Vodafone, “it perhaps leaves the ground open for either of the two brands to remain in India”. However, trying a concoction of both the Idea and Vodafone brands, he said, may make lesser sense and creating a whole new brand is “probably avoidable”. There have been cases where a company wants both its brands to be available in the same market, but that is an expensive strategy, the brand consultant said.

Another senior brand consultant said in every market, there cannot be more than two-three major players. “Very few firms like Unilever have multiple brands under them in the same market, but in the telecom market, although still in its initial stages, Vodafone may be the stronger brand,” he added.