With the merger approaching its final stages, the Kumar Mangalam owned telco Idea Cellular, and Vodafone Plc held Vodafone India have drastically intensified their efforts in a quest to rake in as many subscribers as possible. The merger which was finalised last month has paved the way for the formation of the largest telecom operator in the country with the most prominent subscriber base and revenue market share. The blow from Idea and Vodafone has been delivered to the other large telcos like Reliance Jio and Bharti Airtel.
Incentives to Retailers Increased
The distributors for all of the companies mentioned above have also caught a whiff of the increasing efforts from Idea and Vodafone’s side to amass more and more subscribers. Notably, Vodafone and Idea were giving out Rs 70-80 worth of incentives to each of its distributors. Now those numbers seem to be soaring high. As per a distributor based in Mumbai circle, “Vodafone and Idea’s retailers have been told that for every new customer, they will get Rs 180-250, depending on the recharge plan they manage to sell. Higher the recharge amount, more the incentive.”
Making Up for Lost Subscribers
It is also worth noting that the merger of both the companies comes at a very crucial time when Idea Cellular was losing its share of the pie. Now with the merger already finalised Idea Cellular and Vodafone will release aggressively priced plans to attract more and more subscribers. Right now, combined, the newly formed entity, Vodafone Idea, boasts of 408 million users under its umbrella or 37% of total market share reports Economictimes.
However, there is still a small hurdle in the form of conditions for the merger which require the combined entity to shed subscribers in six circles — Gujarat, Haryana, Kerala, Madhya Pradesh, Maharashtra and UP (West) — to adhere to the 50% subscriber cap rule. Also, as per a report published by brokerage firm Jefferies, out of the 22 circles in which Idea Cellular operates, it lost subscribers in 21 circles while suffering a significant dent in Maharashtra, one of its key circles. Idea and Vodafone together have lost subscribers in 14 circles.
One of the senior executives in a competitor firm said "They (Idea and Vodafone) have lost some of their distributors who now want to join us and they will have to rationalise once the merged entity starts working. So increasing incentives will help them retain retailers in important circles.”
Experts’ Take on the New Incentive Strategy
It is being said that the former market leader Bharti Airtel which has 340 million subscribers under it, will possibly match the levels of Vodafone and Idea concerning incentives. Right now it offers Rs 70-100 worth of incentives for its retailers. However, analysts are of the opinion that this is a tactic which has worked even when the market had 6-7 major players. Now in a consolidated market, merely increasing the incentives for the consumers will fall short of its goal.
Bharat Bhargava, partner and telecom advisory services for ET said in a statement, "The operators need to incentivise the retailers not just to get new subscribers but also to get the customer who will use the telco’s SIM as his primary one. The retailer needs to push your product, not for the second SIM, the battle is to become the main one.”
Reliance Jio’s retailers have also been promised of impressive money and have been told that by selling a JioPhone 2 they will earn Rs 140 while on a Reliance Jio sim they will be making Rs 60. The Mukesh Ambani led telco is expected to increase incentives as much as by 100% in the coming weeks in a quest to chase more subscribers.
A Reliance Jio distributor in New Delhi remarked: "In the current competitive market, Jio may increase its incentives for retailers by 100% for those who just sell a SIM card to a new subscriber.”