Videocon takes the mobile telephony price war to another level!

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Videocon has been a late entrant into the mobile services segment. It entered this segment by starting off services in Tamil Nadu and then moved on a mission to begin services in the top 100 cities of the country. Videocon Group has set aside an investment of Rs 14,000 cr for this purpose. At that time, Videocon had promised a sub – one paisa effective tariff across various pockets which would be transparent and simple.

videocon_mobile_logo

But then the mobile telephony market in the country is one of the most competitive in the world. There are a number of challenges –

  • 635 million mobile subscribers across various demographics have different requirements in terms of tariffs, packages etc.
  • More than 15 odd mobile operators has made surviving in this country somewhat like ‘survival of the fittest’ or as Tata Docomo’s slogan says – Make companies ‘Do the new’
  • Most of the mobile service providers are good only in a few circles of the 20 odd circles present in the country
  • The tariff war launched by Tata Docomo has made all the service providers scurrying for cover to innovate or perish so much so that everyone has launched pay – per second plans

Videocon took all these factors into account and knew that it had to be different to be adopted by the market.

And so it did. Videocon recently launched a pay per second tariff plan for calls to US and Canada making them at par with local calls. In another scheme, customers can call Singapore and Malaysia at Rs 1.69/min.

There a number of positives and negatives of this move.

First the positives

  • This initiative makes Videocon move into a completely different territory compared to its competitors
  • The number of ISD calls from India has increased a lot over the past couple of years and this would boost Videocon’s bottom line
  • This also shows that doing something new is consistently very important and the fact that the telecom industry still has scope for quite a bit of innovation

The negatives of this strategy

  • There’s no entry barrier to this strategy as other companies would now follow the same move like in the case of Tata Docomo. In this case the first mover advantage would surely go for a toss
  • Telecom companies today are sadly just looking for innovation only on the lines of pricing and not any other domain
  • This move just makes one wonder whether these telecom companies would go further into the RED!

The biggest advantage which Videocon has is deep pockets. And that may outweigh the negatives for them. But only time will tell whether they perform or perish.

Do you think this is the right strategy for Videocon to go with in the international market?

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  1. Madhav Shivpuri says

    Yes, there was a post on trak about college students sending out their own satellites. Just the scale, complexity etc., would be different for telecom cos. Let’s see what the teleco competition results in a decade from now.

  2. Altaf Rahman says

    As an after thought I want to share my understanding of a satillite with trak readers.

    To understand how a satillite works, first of all lets start with a small unit.

    Lets take a mine sweeper. We hold a mine sweeper on ground and it reads signals from ground and relays to the operator. Now increase its capacity and range and hold it at a hight of lets say 100 meters in air. It quickens the scan of area by scanning a big area in same time. Now increase its capacity a million fold and keep it in space it scans big area of thousands of sq. kilometers. Thats what satillites do.

    Now take the fishing boats. They take help of satillites in locating big showls of fish so the fishing boats operate efficiently by directly going to the area and catching the fish. How satillite works? It scans the ocean and relays the data to ground stations who pas it on to fishing boats. Same like the example I gave for mine sweepers.

    Now take telcom industry. From the main control station, they lay cables install transmission towers and transmit in a certain range. Instead of cables, instal a satillite, control it with remote control (ground station operations) and from satillite they directly beam the signal to towers. As the capacity and range of satillites are very big the instruments, components are critical so it requires special technology and expertise. Thats all.

    Theory remains same. They are remote controlled equipment designed to specific requirements.
    The requirement can be telcom, coean study, keeping a watch on enemy country, weather reading (reading of clouds), mineral search, outer space observations…..

    Satillites are not rocket science :) Wow what a statement!!

    As an article states recently, even university / collage students are designing satillites in India.

  3. Altaf Rahman says

    @ Aseem and Madhav,

    I dont think owning a satillite is a governmental domain. Any private company can also own a satillite.

    However I am not sure. But I dont think its a very out of the box thing.

    Hello Arun : Can you clarify on this? Can private companies own satillites?

    After all whats a satillite? Its nothing but an electronic equipment controlled and operated to our requirements by remote control. In our home we have so many remote operated things like TV, remote keyboard/mouse, remote controlled toys (race cars, choppers for kids) etc. The only difference is the distance. At home the remote range is may be 100 meters, for satillite the range is may be 1,000 kms.

    Am I too much out of box? Dunno. :)

    1. Arun Prabhudesai says

      Hello Altaf,
      I will have to dig out to find out more on this – However, based on what I know, It is extremely difficult for private companies to own satellites – The reason being data communication. Uplinking and downlinking data from satellites can have huge security threats.

      I remember, in 1996, when we were setting up India’s first private ISP, we did not get approval for downlinking (Internet) data, we had to go through VSNL gateway…

      This is just my own opinion and experience…I really do not know the reality.

      About students sending satellites in space…Govt. knows exactly what purposes the satellite is built and what it will do, so there is no issue..

  4. Aseem Rastogi says

    As you pointed out rightly the next price war in the telecom sector will be in the data domain!

  5. Madhav Shivpuri says

    Hi Altaf,

    Owning satellites…that’s a very innovative suggestion. I don’t know how practical it is but could definitely give some companies a definite cost advantage.

    Calling has become a commodity. People care about the provider only when it comes to the quality which goes back to signal strength. However I envision that the future (or actually the present) will be in data packets… people using apps and internet. We need to have visionaries who can change the industry and try to create a new category instead of just waging price wars.

  6. Altaf Rahman says

    Though I am a layman in this Electronics and IT related fields, I understand this telcom field is also no different from other sectors.

    As this is a game of volumes, there are two components to this business.
    1) Attract more customers,
    2) Do business at low rates, still make profit.

    Unless u fulfill both components, there is no meaning of doing business in this sector.

    From the article above, I understand that till now every one is trying to attract more customers with outrageous offers.

    Now coming to the second part, how can they offer and still make profits? My understanding is that they have to keep costs low. One way of doing this is by ownign the satillites and control stations. India has proven to be cheapest launching country in the world as far as satillites goes. So if the telcom companies launch their own satillites and ground control, their costs will come to nil. (Once they launch satillites, the cost of operating & maintaining is next to nill)

    I think AT&T, BT and many otehrs have their own infrastructure (satilites, control stations, transmission towers, etc) all set. In India when we talk of telcom infrastructure, we talk only of towers and forget about satillites.

    This activity will give boost to anotehr sector – private satillite designers and assemblers in India!! (No need to depend on west for satillites)

    I think this way the companies can offer low costs.

    1. Aseem Rastogi says

      Your suggestion about owning satellites in really an interesting and innovative one. But I wonder whether it will be practically possible to do that.

  7. Yaamini says

    Nowadays all most all mobile companies are following the same trend and the call rates are almost the same. Only the service provider with best network clicks. So videocon still has to match up with service providers like Airtel and Vodafone. Should see how videocon picks up

    1. Aseem Rastogi says

      Network is the most important and without that basic facility nothing can succeed

  8. Siddharth Karia says

    Personally, I couldn’t care much about call rates, because they’re pretty low as it is, what really surprises me is that all companies are jacking up GPRS rates and adding restrictions on usage. The same goes true with broadband. I’m hoping someone starts off a data tariff war, that can really give operators the edge because more and more people are starting to use GPRS / EDGE. Any comments?

    1. Aseem Rastogi says

      Yeah actually that would be the next battle ground for mobile service providers across India

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