– Divyanshi Chouhan1


The paper is primarily concerned with the changing trends, which the 21st century witnessed in terms of business and commercial contracts and how does it affect the working of business contracts in today’s world. The research work also covers ther merger between two of the biggest telecommunication companies in India; their history, their present status, advantages, reasons, legal aspects and the other essential things about the merger are also cover under this paper. The conditions associated with the performance of the contract and the statements of the companies and their opinion related to the merger.



Business contract refers to the agreements which are legally enforceable by law and creation of which requires offer, acceptance, its performance, terms and conditions of performance of that agreement. The law provides remedy in case of a breach of contract.Remedies aim to bring the wronged person back to his position before the violation and to punish the party who breached the contract.

Change is something which can never be changed. In this ever-changing world business laws are becoming more uniform. Earlier business contracts were mostly based on state laws rather than federal law. The laws were different in every state which made it a problem. With the change in the business sector there have been tremendous growth in small and medium scale industries which needs business contracts to be more uniform. A contract is a set of rules which defines the mutual obligation and rights which are necessaryto govern an exchange.2

With the changing nature of businesses in this new era, there was a need to reform the contracts relating to it, which justifies every aspect of the changes happening around the world related to the businesses3. So, here in this study the primary focus is on how the changing nature of businesses has affected the nature of contracts and How a contract between Idea and Vodafone (two of India’s biggest telecommunication company’s) has formed.

1 B.B.A.LL.B., II Sem., Indore Institute of Law

2 Changing nature of the business contract. Management essay. Published: 23rd march,2015

3 Changing nature of employment contract – William brown, David Rea. First published: August 1995



Idea on March 14, 1995 incorporated as Birla Communications Limited and was granted a certificate of commencement of business on August 11, 1995. Their registered office is in Mumbai, Maharashtra. After the introduction of the “Idea” brand, the name of the company changed to Idea Cellular Limited on May 1, 2002. Goodbye Industries Limited in the interest of the Tata Group andAT&T Wireless Services Inc. for the benefit of theAWS Group following which the name was changed to Birla Tata AT&T Limited on November 6, 2001.

Subsequent to the presentation of the “Thought” mark, their name was changed to Idea Cellular Limited on May 1, 2002. The AWS Group left from the Company on September 28, 2005 by offering 371,780,740 Equity Shares of the Company, which constituted half of the holding ofAT&T Cellular Private Limited in our value share capital, to ABNL and by exchanging the staying 371,780,750 Equity Shares to Tata Industries Limited. The Tata Group stopped to be an investor of the Company on June 20, 2006 when Tata Industries Limited and Apex Investments (Mauritius) Holding Private Limited (earlier known as AT&T Cellular Private Limited) sold every one of their offers in the Company to theAditya Birla Group4.

On the other hand when we talk about Vodafone, it was officially launched on January 1st 1985 under the name of Racal- Vodafone Ltd. On June 19,1999 Vodafone purchased, Air touch communications and changed its name to Vodafone Airtouch plc. On a worldwide level, theyaccounts for almost 444 million clients and 19.5 million in the UK. They even made the world’s first since forever versatile approach January first, 1985 when they shifted from London to their Newbury central station.

The organization moreover utilizes more than 13,000 individuals over the UK, of which numerous are Vodafone client administration and deals delegates. The free number can be found on their official site. With some unfathomably savvy speculations and creative thoughts, Vodafone really has an amazing history5.

4 The economic times, ET Markets. Idea cellular ltd.

5 Vodafone success story.


The two major telecommunication industries operating in India i.e. Vodafone and idea will soon ring their bells in a new way. Vodafone India and Idea cellular merged to become the biggest telecommunication companies of India. The merger of Idea Cellular with Vodafone India will have wide-ranging implications for the industry, services, the staff and consumers.

The merger will push more moves in the telecom sector. Vodafone which is at number 2 position in this telecommunication business and Idea which is at number 3 positionin the industry has join hands to become the number 1 in this race, pushing Airtel the number 1 company at the telecom sector downwards. Airtel which has around 27 crore subscribers at present scenario, the voda-idea merger will lead to a fall in the customers of Airtel and the subscribers, of Vodafone and idea will increase up to 39 crore which will be substantially higher than that ofAirtel.

According to Mr. Himanshu Kapania the counterpart of Idea cellular said that, “the companies after their merger will have 270,000 GSM sites and mobile broadband network over 300,000 sites (3g and 4g). India has over 1 billion of mobile phone subscribers and the network of voda-idea will cater to around 700 million subscribers as compared to their total base of over 433 million. He also states that merger of the companies “will certainly enhance your mobile experience by providing greater broadband speed, better voice quality and indoor coverage.”

The merger entity will be having around 42% of the customer base and nearly 37% of the revenue market share which will displace BhartiAirtel from the first position and will put the companies at a stronger place. The merged entity will be led by the Balesh Sharma as CEO, Akshay Moondra as CFO and Ambrish Jain who is the current M.D at Idea. On the other hand, Suvamoy Roy will be responsible for all the HR functions of combined business. The companies decided to merge their business as they were facing a huge tariff war and with the entry of Jio, they were facing a strong reduction in their profit margins.


Vodafone India extended its contract of outsourcing with IBM to cover Idea cellular along with the work to streamline and standardize on its own. It propossed $23-billion merger between the phone companies.

According to the terms decided in the merger agreement, idea cellular will be getting equal voting rights even after being a relatively smaller they, will have an option from the Vodafone to buy its equity shares at pre-determined prices. The Birla group will also get chairmanship in the board.6 The idea-Vodafone merger will create the largest telecom company in India, at equity valuation pegged at Rs 94,600 crore. It gets theAditya Birla group to pole position and saves Vodafone plc from having consolidate the India business on its balance sheet, report says7.

“Vodafone is a larger company as compared to Idea cellular so Vodafone should have has a better position in the contract but allowing an equal relationship, Vodafone have a better quality of control but, the Idea seems to be favoring itself.” Iias thinks that Vodafone has given more in this deal. According to the reports Vodafone has been generous in other ways too. It has given the Birla group a three-year period to equalize their equity stake, yet idea has equal voting rights even before the stake equalization.

Vodafone, also granted a call option to idea cellular on 9.5 percent of its equity shares without any premium. The Aditya Birla group can within the time period of next three years acquire from Vodafone up to 9.5% of the combined entity’s share at the value pre-determined value of which is Rs. 130. In case if the Birla group does not acquire its equity, Vodafone will be compelled to sell its equity stake till when it equalizes with that of Birla’s group.

It means if the price of Rs. 130 is not attractive, the Birla group won’t exercise its option to purchase equity and Vodafone will lose the opportunity to encash its holdings.

Vodafone and Idea Cellular Ltd. both the companies will have a joint control of the combined company. Once the customers of Idea and Vodafone are combined they could be the biggest telecommunication company of India. This merger will be the significant response to their competitors like Reliance Jio.

The agreed ratio of share between the companies is fixed to 1:1. This means that every share held by someone will get exchanged with a new share in the merged company. However, the worth of Vodafone is much higher than that of idea.

6 Vodafone India- Idea cellular merger cleared by competition commission. By- pankajdoval. July 24, 2017 IST-23:17

7 The Hindu- Business line.

An evaluation suggests that the business worth of Vodafone is valued as Rs. 82,800 crores, whereasthe net worth of idea is valued at Rs. 72,200 crores. Idea and Vodafone will maintain an equal partnership and for that Vodafone will have 45.1% stake in combined company that is after transferring a 4.9% stake at Rs 110 per share to Aditya Birla Group at Rs. 3,900 crores in cash. Idea cellular will then own 26% of the combined company and the remaining 28.9% will be owned by idea shareholders.

TheAditya Birla Group will have a right to buy additional 9.5% stake fromVodafone over the next 4 years which will ensure that both the companies have an equal stake inthe new company.8 Vodafone and idea in a statement mentioned about their annual savings will be around Rs. 14,000 crore both in terms of operating cost and capital expenditure.


The main reason behind the merger of these two big telecommunication companies is not just the growth of data or the Reliance Jio. Kumar Mangalam Birla, the chairman ofAditya Birla Group stated the reason behind the merger. He stated, “As we got complementary assets in different markets this is based on the business fundamentals. Vodafone is a more dominant in metros on the other hand Idea is quite popular in rural areas. We would together have a market share of around 40%. We believe it is the business logic that has driven this combination and we believe that for us and for all other shareholders, this is something that will create immense value.”

CEO of Vodafone on the other hand says, “You people talk about Jio but the market leader is someone else and therefore it is not just about Jio. In this competitive market we continue to be competitive. Now both the companies will be more sustainable as we will be coming together and will be among the top two telecom companies in all Indian circles, except Jammu and Kashmir. We don’t have below 10% of market share in any single circle, which means that we can make money in each circle and reinvest in other circles. Our decision to merge the companies has nothing to do with Jio.”9

8 Vodafone-Idea merger: K M Birla, Sebi chief discuss regulatory aspects. By Shrimi Choudhary. Last updated: July 14, 2017.

9 Idea seeks telecom department’s nod for merger with Vodafone. By GulveenAulakh, ET bureau. Updated a ugust 23, 2017.

When asked about the tariff, what the industry has been witnessing, Birla said, “I don’t see any connection between the merger and the tariffs. We will still have 5 players in the market and will remain intensely competitive market like in the other parts of the world.” The other doubt relating to the merger was if they see regulatory environment as a major challenge then Colao said, “I don’t think of regulators as a challenge, rather what I think is the regulation will help the industry develop.”10


The Vodafone- Idea merger will provide following benefits to the consumers, stakeholders and the government in following manner :

1. It will provide better network quality and better customer experience both in terms of product and service touch.

2. The merger will provide a stable position to the telecom company.11

3. The ongoing amalgamation will create India’s biggest telecom company and the world’s second largest which will provide the industry benefit from greater stability and better networks which will emerge.12

4. For the company it will lead to almost $10 billion of cost savings, over a span of 4 years. With the financial health of the sector at its worst, the merger will prove an ease to the debt to the companies.

5. As technology is the biggest driving force of the economy which is creating new jobs, connecting people and delivering the government services to every corner of the country including the rural areas becoming a tool for government programs like Digital India, Smart cities, Skill India, Make in India etc.

6. The merger of both companies willbenefit the programs like e-education, e-governance, e-medicine etc. 13

10 Reliance Jio not main reason for merger of Idea cellular, Vodafone: Victoria Colao. March 20, 2017. 02:39 AM IST.

11 Idea- Vodafone merger: What’s in it for the customers. By sunny Sen. Updated: March 20, 2017.

12 The Vodafone -idea merger will benefit all stakeholders. By- Rajan S Mathews. April 03, 2017.

13 The Vodafone idea merger- see competition benefits the consumers. By Tim worstall. March 20, 2017, 5 :22 am.


Vodafone and Idea have requested to recalculate their dues from the Department of Telecommunication, but DoT has denied it stating that, if saying it the numbers are correct and that two of India’s largest telecom companies should pay up to get a final seal of approval on their merger. A senior DoT official told that, “The department’s calculation seeking bank guarantees and cash payment from idea cellular and Vodafone India, respectively, are correct and have been communicated to the companies.”14 DoT demanded Rs. 7,268 crore payment towards the dues and said the two companies owe it.

It is split between a bank guarantee of Rs. 3,342 crores on Idea and claimed Rs. 3,926 cash payment towards the market price for the airwaves held by Vodafone India.15 Both the organizations have the combined obligation of around Rs 1.14 lakh. With disintegrating client base and declining incomes because of intense rivalry fromAirtel and Reliance Jio, both the new substance needs to inject more cash-flow to build its 4G tasks.

Once affirmed, Idea-Vodafone will be the biggest telecom element in the nation with a joined supporter base of more than 430 million, in front of the present market pioneer Airtel.”The division’s counts looking for bank assurances and money installment from Idea Cellular and Vodafone India, individually, are right and have been conveyed to the organizations,” the Economic Times cited an official as saying.

Presently, it’s normal that the two telcos will approach the Telecom Disputes Settlement and Appellate Tribunal to contradict the DoT request. In any case, the report additionally cited DoT authorities saying the division is completely arranged to challenge the issue up to the Supreme Court, a procedure that will postpone the whole merger process, which is touted to be the greatest ever in the Indian telecom industry.Both the organizations had before guaranteed to finish the merger before June 30.

The postponement has blocked assets worth over $10 billion that will join the consolidated substance through cost and capital consumption cooperative energies. The telcos’ gauge of procuring opex funds of around $1 billion through the merger by FinancialYear 2020 would likewise begin to dissolve.

14 DoT rejects Vodafone, Idea plea to recalculate dues; says ready to contest matter in court. By busin ess today at Wednesday July 18, 2018.

15 DoT looking into Voda-Idea’s plea on dues re-computation: Secretary. By PTI July, 18 2018.



The paper dealt with how the business contracts have changed in this new era of technology and how the business contracts are coping up with these changes. On the other hand, the main focus is on the contract of merger entered by the two big telecom companies and the effect of it to the companies, its consumers, its stakeholders and the government. Also, the paper has studied about the history of both of the companies and the reason behind their merger – also, the role of DoT i.e. the Department of Telecommunication in their merging contract.

The study has clearly shown that the Reliance Jio is not the supreme reason behind their merger and have discussed the factors which has affected this decision.The paper has also studied how the merger is going to change the economy and the people living in it and also the economic condition of both of the contracting parties.