Vodafone-Idea - Monopoly or Better Service?

Vodafone-Idea - Monopoly or Better Service?

“When one door closes, another door opens; but we so often look so long and so regretfully upon the closed door, that we do not see the ones which open for us.” - Alexander Graham Bell

The royalty got a jolt when Jio made a dashing entry and stole the show (and the subscribers too!). The undisputed monarchs of Indian telecom scenario were shaken to their core and they made a frantic attempt to stop the damage done. It may be the lethargy and the indifference of the leaders that led to Jio delivering a huge blow to revenues and market share of telecom giants like Airtel, Idea, Vodafone, etc. Though freebies cannot last forever and some day Jio has to start charging their consumers, they still managed to mobilize the entire Indian telecom industry on a war footing. One of the most important implications of this was ‘opening of a new door ‘i.e. the much talked Vodafone-Idea merger. But how much useful will this merger be or is it just a way to monopolize the telecom market?

Consumer loses

• The merger will make Vodafone-Idea entity, the largest telecom operator in India overtaking Airtel. This gives it control over a huge market share which leads to monopoly.
• Consumers are truly free only when they have choices. With such mergers, the choices get restricted and may also lead to cartelization.
• Indian telecom industry already had few players and with such consolidation the number will decrease further. This essentially kills competition which is dangerous as competition is the primary driver of innovation and better and affordable services.
• Through monopoly or cartelization, prices of products and services will increase in the long term since the telecom operators can reach an understanding/consensus and fix the prices.
• Again when choice is limited and there is surge in demand, the prices would rise. As people have no other option, they will bend to the whims of the telecom giants.
• With mergers comes layoff of the workers. This means losing thousands of jobs.
• Also, when merged entity has a huge market share, and it fails, it takes a lot of customers down with it. That affects not only the customers but also the productivity and income of the nation.
• Consolidation is good idea for streamlining services, but it is bad if it leads to monopoly.
• Diffused market share serves well as it promotes adoption of better financial as well as technological practices and keeps the customers at its centre. The companies follow the customer. With monopoly or large market share, the profits become the main aim as customers have to follow the companies (since they are left with very few choices) and not the other way around.

Consumer reigns

• Vodafone-Idea merger spells benefit for consumers. Everything is done to make sure that all benefits pass to the consumer.
• The consumer gets the best of both the companies plus any added advantages which the merger or consolidation brings.
• Due to the price war going on due to Jio, this merger will only increase the competition and fighting capacity of Vodafone and Idea against Jio and other telecom operators. This means reducing prices further.
• It would be possible to reduce operating costs and increase savings, and again passing this benefit to the consumers.
• It is also possible to share latest technologies which would be beneficial for the consumers of both the companies.
• Due to merger, both companies can use each other’s infrastructure giving a tremendous boost to the availability of network and better range. The roaming problems would also be reduced.
• Merger will help in sharing of vital resources which can help provide higher speeds and streamline services, giving better quality of service and customer experience.
• Both the companies can contribute to reducing their debts and this will help in improving financial health of the companies and the telecom industry in India in general.
• With only few major companies on the scene, the revenues will increase as each will get bigger market share.
• Cartelization and monopoly will not be a concern as the government can anytime intervene if there is situation of monopoly under provisions like the Competition Act, etc. Also, State owned BSNL is another major player that provides affordable service in low cost.
• Sometimes, mergers need additional employees to cater to the increased market and this can lead to employment.

To speculate the effects of the merger right now would not be advisable but there is no doubt that primarily the merger looks very good and would be beneficial to the customer as well as the telecom industry of India. There are enough checks and balances in India to avoid monopolizing tendencies. Also the consolidation will solve much of the network and roaming problems which the consumer faces. Reduced costs, higher speeds and better network connectivity are the three things that make or break a telecom company and the merger would see ticks on all three fronts.