Even as the 5G battle intensifies, finding itself cornered, Vodafone Idea (Vi) has complained to Trai, the Telecom Regulatory Authority of India, that Reliance Jio and Bharti Airtel are yielding predatory pricing with their respective unlimited 5G offers.
Predatory pricing is a pricing strategy used by companies to gain market share by setting prices lower than their competitors. In recent years, two telecom giants in India, Airtel and Reliance Jio, have been accused of using predatory pricing to gain an edge over their competitors, including Vodafone, and this is not an issue that has cropped in the present ahead of 5G rollout but something that has been spoken against by Vi even in the past!
While calling on Trai to take necessary action against its larger rivals, the struggling telco has said that both companies, being significant market players (SMP), cannot offer 5G for free, and that too for an unlimited time, thus revving the subscriber churn at cash-strapped Vi.
In a response sought by Trai, both Jio and Airtel have rejected Vi’s allegations. According to officials familiar with the matter, the companies, in separate responses, have said they can’t be called out for offering predatory tariffs as 5G currently has a minimal user base, with the network rollout currently underway.
Moreover, it is said that Jio and Airtel have further argued that they are not offering anything for free as 5G is being given as part of 4G packs and are charged accordingly.
Trai is said to have taken cognisance of the complaint by Vi and has, in accordance, sent notice to Airtel and Jio; both companies have given their replies on the said matter.
The Same Game Yet, Again?
Airtel and Reliance Jio offer cheaper data and voice plans compared to Vodafone, which has led to a significant shift in the telecom market. This has resulted in a loss of subscribers for Vodafone, and the company is struggling to keep up with the competition.
One of the main factors that have contributed to this situation is the rise of Reliance Jio. Since its launch in 2016, the company has aggressively undercut its competitors by offering free voice calls and data services at rock-bottom prices. This pricing strategy has been hugely successful, and Reliance Jio has quickly become the dominant player in the Indian telecom market.
Airtel, which was previously the market leader, has also been affected by Reliance Jio’s pricing strategy. To compete with Reliance Jio, Airtel has also had to lower its prices, which has impacted its profitability. However, Airtel has managed to retain its subscriber base by offering better network quality and customer service than its competitors.
In contrast, Vodafone has struggled to keep up with the competition. The company has been unable to match the pricing of Airtel and Reliance Jio, and as a result, it has lost subscribers to these companies. In addition, Vodafone’s financial situation has been worsened by the huge amount of debt it has incurred due to the spectrum auction and the acquisition of other telecom companies.
Hence, the predatory pricing strategies of Airtel and Reliance Jio have severely impacted Vodafone’s prospects in the Indian telecom market. Unless Vodafone can find a way to compete with these companies, it is unlikely to regain its position as a market leader.
Trai’s Answer To 5G Allegations
Apparently, following Vi’s allegations, the regulator asked Jio and Airtel two specific questions, one on predatory pricing and one seeking details about their unlimited 5G offers.
5G Rollout – A Game Changer And A Significant One For Vi
The 5G rollout is likely to have a significant impact on the telecom market. Both companies are expected to use their existing predatory pricing strategies to undercut their competitors, including Vodafone.
Reliance Jio has already made significant investments in 5G technology, and the company has stated that it will launch 5G services as soon as possible. In addition, the company has also announced that it will partner with global companies such as Google and Facebook to develop 5G technology in India.
Airtel, on the other hand, has also announced its plans to launch 5G services in India. The company has partnered with global companies such as Ericsson, Nokia and Samsung to develop its 5G network infrastructure.
However, the launch of 5G by Reliance Jio and Airtel is expected to be a major challenge for Vodafone. The company has been struggling to keep up with the competition, and the launch of 5G by its rivals is likely to further reduce its market share.
The predatory pricing strategies of Reliance Jio and Airtel are also expected to continue in the 5G era. These companies are likely to offer cheaper 5G plans compared to Vodafone, which will put further pressure on Vodafone’s profitability.
In addition, the significant investments required to develop 5G technology and infrastructure may further strain Vodafone’s finances. The company has already been struggling with high levels of debt, and the launch of 5G may require it to invest even more money to keep up with the competition.
Overall, the launch of 5G by Reliance Jio and Airtel is expected to be a major challenge for Vodafone. Unless Vodafone can find a way to compete with these companies, it is likely to continue to lose market share in the Indian telecom market.
What Are The Criteria For An Significant Market Player – SMP
A telco can be identified as an SMP if it has over 30% share by the number of subscribers, revenue market share, traffic volume and network capacity in a given circle.
While both Jio and Airtel have more than 30% in most circles, Vodafone Idea has similar shares in 4-5 circles, including Mumbai, Kolkata, Kerala and Maharashtra. Hence, Vi is also offering unlimited packages in circles where it is an SMP at low tariffs.
Also, a tariff can be considered predatory if a telco having over 30% market share offers below-cost services in that specific market. But currently, since the cost of 5G still needs to be calculated, it would be difficult to identify if the tariffs are below-cost or not.
There is no bar on telcos offering unlimited plans, but they must explain the terms and conditions to customers.
For instance, for unlimited data plans, the telcos must inform customers if the fair usage policy (FUP) – or unlimited till a certain amount of data, after which the speed slows down — is applicable.
In their responses, Airtel and Jio have reported to have told Trai that though the 5G data plans are truly unlimited in nature, still the usage has not been very high.
The telcos have seen an average usage of around 8 GB on 5G. They can fix the limit to 400-500 GB anytime, but it is unlikely to be fully utilised by customers as 5G is still not the dominant technology. So there is no use for a FUP, and the majority of the users are still using 4G.
The two telcos have also said they have spent crores to launch 5G. “They stress that they should be allowed to give 5G at current tariffs, and if Vodafone Idea has not launched 5G, customers should not be made to suffer,”.
In conclusion: This may be a tough one for Vodafone Idea to tackle