Vodafone Idea starts to lobby for minimum pricing

Vodafone Idea has written a letter to the Indian Government which suggests it is pushing for minimum pricing to ensure a healthy and sustainable telco industry.

As it stands, the competition conundrum in India heading towards a perilous conclusion. With Vodafone threatening to abandon its pursuit of digital riches in the country, a defacto market duopoly is increasingly becoming a realistic outcome. This would be far from a perfect position.

According to The Economic Times, Vodafone Idea has demanded the introduction of a minimum cost for data tariffs in the country. The proposed plan would see prices set at a minimum of 35 Indian Rupees (c.$0.48) which would be more than double the average cost per GB in the country as it stands. Vodafone Idea is also asking for free phone calls to be banned.

While Indian consumers might be disturbed by the prospect of a price hike, especially considering there was already one three months ago, it is perhaps a necessary step to ensure competition is preserved in the country.

The introduction of Reliance Jio in 2016 was seemingly an effort to stimulate progress in a lethargic telco industry, hence the Government assistance which was offered to the firm. But it arguably went too far, taking prices far below want would be deemed sustainable for the competition which have to deal with legacy networks, products and business processes.

Looking at the concept of competition, it is generally accepted that 3-4 telcos are required to ensure the consumer is protected through suitable competition. This unofficial rule has resulted in many acquisitions being denied in Europe, or at least there being major concessions being offered to create a replacement. The same scenario is currently being played out in the US with T-Mobile and Sprint merging, but with Dish emerging as a replace fourth player.

However, India as a country is a different case. With a population of 1.3 billion, many of whom will live in areas where the digital divide is incomprehensible to those in more developed digital markets, perhaps Indian authorities should be doing more to encourage more investment and competition. Three MNOs does not look to be a sustainable position right now, and the prospect of dropping to two would worry many.

Vodafone has threatened to pull out of its joint venture with Idea Cellular due to the $7 billion spectrum licence bill it is facing, though it does seem to be searching for ways to make the situation work. The proposal to introduce a minimum price for data could add more security for the firm which is desperately attempting to avoid bankrupting itself in search of the rainbow’s end.