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Reliance Communications & Aircel Merger - Good News for Company & Bad News for Employees

It's really encouraging that Indian Telecom service provider sector is witnessing consolidation. Post liberalisation of rules and regulations around spectrum trading, we have seen series of spectrum buyouts. It offered companies like Aircel, Videocon, and RCOM to monetize their assets and helped them reduce debt level.

Reeling under stiff competition and near stagnation in revenue and profitability coupled with problems in servicing debt forced small players to join hand.

Reliance communications and Aircel agreed to merge their wireless business with equal partnership and their clear intention is give tough time to established players to Reliance Jio. 

They also offloaded their debt and transferred it in new entity. Many analysts said that Reliance communications reduced their debt level by 20k Cr but fact is different. Reliance communications will have the same debt level on consolidated basis.

Both the companies are also scouting for additional $1 bn investment so that they start improving their network as well as sharpen their innovation to be in the game with more than 190 MN subscribers Base.

In my point of view, consolidation in the sector was necessary to ensure that limited player gets the timing power but the entry of Reliance Jio spoiled the scenario completely.

It is also expected that post Reliance jio commercial service offering starting 1st Jan 2017, industry will get back to a situation of pricing power.

At that point, real game to retain or snatch the premium customer will start.

As per the press release by Reliance communications that merger will take another two quarter and it is really good for both the organization as they will realign their caper and opex.

While everyone talked about the benefit of merger but no one talked about the employees attached with both the organization. It's a done deal that there will be major layoffs in Finance, legal, sales, operation, products and other. Most of the employees will be on their toes as they don't know about their future. 

Isn't it so easy to say that we look for profitability and suitability but no one think about employees who put their heart and soul to make the company.

If reader think that my point of view is correct and went through the similar situation than please share with your friends.For a country like India where there is no social security or government support in case someone loses their job, it's a tough situation to be in.

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About Devendra Prasad

20 years plus industry veteran of domestic and international ICT domain with the expertise in Business, Technology, Strategy and Analysis. Specializes in forecasting impact analysis, trends and recommendations for Investments, Technology and Regulations.
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