How Vodafone Idea's 5G launch in March could shake up telecom pricing

Vodafone Idea is set to launch 5G services with competitive pricing to challenge Jio and Airtel. It has finalised $3.6 billion worth of contract to enhance 4G network and deploy 5G infrastructure

Vodafone Idea (Vi) is gearing up to launch its 5G mobile broadband services in March, with competitive pricing to attract customers from rivals Reliance Jio and Bharti Airtel, which already offer nationwide 5G networks, according to a report by The Economic Times.

 

Initially, Vi is expected to roll out 5G in 75 cities within its 17 priority circles, focusing on industrial hubs with high data consumption, the report said. Industry experts predict the company’s entry-level 5G plans could be priced up to 15 per cent lower than current offerings from Jio and Airtel, potentially sparking a price war.

 

The report quoted a Vi spokesperson saying that the company holds sufficient 5G spectrum in its priority markets to enhance 4G coverage and deploy 5G swiftly. The company may also adjust its distribution strategy by increasing dealer commissions and promotional spending to reclaim high-value prepaid users from its competitors, the report said, quoting a leading telecom analyst.

 

 

Global brokerage Jefferies reported that Vi spent approximately Rs 3,583 crore (8.4 per cent of sales) on dealer commissions in FY24, surpassing Jio’s Rs 3,000-crore expenditure (3 per cent of sales) but falling short of Airtel’s Rs 6,000 crore (4 per cent of sales).

 

Both Jio and Airtel recently raised their base plan thresholds for 5G access during the July 2024 tariff revisions, pushing users toward higher-value plans as part of their monetisation strategies.

 

In contrast, Vi CEO Akshaya Moondra said the company may offer lower base pricing for its 5G services, though final decisions on pricing will be made closer to the launch. Moondra emphasised the urgency for Vi to expand its 4G network and introduce 5G to retain customers and compete effectively.

Focus on user experience

The news report quoted Vinish Bawa, telecom leader at PwC India, as saying the competition for 5G subscribers will not only revolve around pricing but also on delivering superior network performance and customer experience.

 

With Jio and Airtel already serving 148 million and 105 million 5G users, respectively, Vi’s ability to offer reliable services at affordable rates will be crucial to its success. However, some analysts caution that aggressive price cuts could hinder Vi’s average revenue per user (ARPU) growth, aggravating its financial challenges. Despite this, Vi’s recent equity funding of Rs 24,000 crore and an anticipated Rs 25,000 crore in debt funding — enabled by the government’s waiver of bank guarantee requirements — provided the telco with resources to expand its network and recapture market share.

4G and 5G network expansion

Vi has finalised $3.6 billion (Rs 30,000 crore) worth of contracts with global vendors Nokia, Ericsson, and Samsung to enhance its 4G network and deploy 5G infrastructure. The company plans to add 75,000 5G sites over the next three years and accelerate its network expansion to improve connectivity and user experience. Industry sources report that Vi will use a combination of 3.5 GHz (C-band) and 1,800 MHz spectrum for its initial 5G rollouts, the report said.