Vi's 5G launch could benefit Jio, Airtel users: Here's why
What's the story
Vodafone Idea (Vi) will launch its 5G mobile broadband service in India this March, the Economic Times reported. The company will be offering these services at competitive prices, around 15% lower than those of its main rivals, Reliance Jio and Bharti Airtel. Vi's aggressive pricing strategy could trigger a price war within the telecom sector. To retain their subscriber base and prevent customer churn to Vi, Jio and Airtel may be compelled to make their 5G plans cheaper.
Expansion plan
Initial launch to cover top 75 cities
Vi's first 5G launch is likely to cover India's top 75 cities in its 17 priority circles. The company also intends to target industrial hubs with high data consumption. Vi may also "play with distribution costs," said the ET report. This could mean increasing dealer commissions, promotional spending to lure high-value prepaid users from rivals. The move comes as Vi secures ₹24,000 crore in equity funding and expects to raise another ₹25,000 crore through debt.
Financial strategy
Vi's spending on dealer commissions surpasses rivals
In FY 2023-24, Vi spent about ₹3,583 crore (or 8.4% of sales) on dealer commissions, investment bank Jefferies revealed. This was more than what Jio—the leading telco in India—spent on dealer commissions during the period (₹3,000 crore). The company's increased expenditure is part of its strategy to take on these established players in the market.
Infrastructure development
Vi finalizes $3.6 billion deals for 5G gear supplies
Notably, Vi recently closed $3.6 billion worth deals with Nokia, Ericsson, and Samsung for 5G gear supplies. The company plans to set up some 75,000 5G sites in the next three years. This infrastructure development will be a key component of Vi's plan to launch and expand its 5G services across India successfully.