Videocon sub 1 paise

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.

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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