Friday, 22 March 2013

Videocon will offer services at 25% below current market rates, analysts fear another price war
NEW DELHI: Mobile operator Videocon, which won back airwaves in six regions in the November spectrum auctions, will offer voice and data services at about 25% below current market rates, its chief executive and director, Arvind Bali, told ET.
The Gurgaon-headquartered company's move could trigger yet another tariff war in India's mobile telephony space, similar to those of 2009-10 when new entrants destroyed the industry's pricing power and sent its profits plunging. Videocon's plan also comes at a time when mobile tariffs have troughed, operators are rationalising discounted minutes and gradually increasing call rates.
On whether the company's strategy could destabilise the domestic industry, Bali said the group's traditional strength in sectors such a consumer durables was its pricing power. "We have to play to our strength."
VideoconBSE 0.23 % has also decided against outsourcing the management and maintenance of its networks to equipment vendors, a practice generally followed by leading mobile phone companies in the country. Bali said executing these functions in-house would be more economical. Its competitors — BhartiBSE -2.72 %, Vodafone, Idea and Reliance CommunicationsBSE -0.27 % — have signed multibillion dollar outsourcing contracts with network vendors, IT firms and business processing units.
Bali said the company would not participate in the upcoming third round of spectrum auctions, but would only look at expanding its footprint.
Videocon plans to provide voice and fourth generation (4G) data services simultaneously when it begins operations with Gujarat later this year. This is possible as auction rules allow operators to offer any form of mobile service on their allotted spectrum. According to Bali, about 40% of commercially deployed networks on 4G long-term evolution are on the 1,800 MHz spectrum.
In 4G data services, Videocon will be eventually compete with Reliance IndustriesBSE -0.08 %, the only company to have bagged 4G airwaves on a pan-India basis in the 2010 sale process. But Reliance Jio Infocomm has 4G spectrum in the 2,300 MHz band, the ecosystem for which is yet to take off.
In comparison, Bali said that LTE device ecosystem for the 1,800 MHz frequencies was already 150 strong. This band, which has traditionally been used for second generation (2G) voice services, is witnessing strong evolution towards LTE, Bali said, adding that 50% of the global chipsets volumes will support fourth generation services in this frequency by 2015-16.
Videocon was amongst the worst affected when the Supreme Court in February last year quashed 122 permits because of alleged irregularities in the 2G spectrum auction in 2008.The company lost its pan-India permits. It then won back airwaves in six circles — Haryana, Madhya Pradesh-Chhattisgarh, Gujarat, UP west, UP east, Bihar and Jharkhand for Rs 222 crore.

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