Whenever companies in a protected market become complacent, disruption is not far off in the form of a revolutionary newcomer.
India’s telecom biggies — lulled into complacency with copy-cat products and tariffs — are now undergoing a mega disruption in the form of Reliance Jio’s entry.
While Bharti Airtel has responded by cutting its data price by 80% in response, No. 2 Vodafone — arguably the priciest operator in India — has kicked off what it calls “a revolutionary new concept” by offering ‘Flex’ recharges.
Basically, instead of recharging for money, you recharge for ‘Flex’ points. Each point can then be used for making calls, SMS and data — just like you would use your regular balance.
So, why is this different?
Two reasons: One – when you pay using Flex points instead of regular balance, everything is cheaper (more on this later.)
Second – unlike regular recharges — where you get 1 rupee of balance when you recharge with 1 rupee — here, when you recharge using a higher denomination, you get more Flex points per rupee. This is a bit like the ‘more-than-full-talktime’ that MTNL and Tata DoCoMo used to offer.
For example, MTNL used to give about 600 rupees of balance if you recharged for 500 rupees, while you got only 200 rupees of balance if you recharged with 200 rupees.
So, each Flex point costs 37 paise if you recharge only 119 rupees, and 25 paise if you recharge using 299 rupees and 23 paise if you recharge using 399 rupees.
Of course, it’s not quite the same as ‘more than full talktime’ offer, because the talk times are valid indefinitely, and you can spend the 600 rupee talktime over the next three months.
However, in case of Vodafone, the points are valid only for 28 days, and if you don’t utilize your ‘balance’, the points simply expire.
Leaving that aside, let’s see if it’s truly revolutionary or not.
First, look at what the company is offering.
It is offering 1 MB of data, 1 SMS or 1 minute of incoming call (roaming) for 1 Flex point. However, outgoing calls cost 2 points.
Is this cheap?
Sure, it’s cheaper than what Vodafone currently charges. For example, the company charges around 72 paise per outgoing minute of call. In comparison, two flex points cost only around 50 paise (if you recharge 299 per month).
Similarly, the company charges Rs 1 per SMS, while under the new system, a text message will cost only 25 paise (1 flex point).
So too, in case of 1 MB of data, which now costs only 25 paise and not 4 rupees.
IS IT ENOUGH?
The move is clearly aimed at trying to retain its customers, who are being aggressively lured by Reliance Jio. Jio, in comparison, is offering 4 GB of data and unlimited calls for 28 days for Rs 499.
For voice only users, it is offering unlimited calls and SMS for 28 days at Rs 149, while Vodafone’s new program will give around 250 minutes for the same amount.
FLEX FOR FLEXIBILITY
One of the key advantages for Vodafone under the new scheme would be that it can now tweak its prices without having to announce a price cut.
In other words, it can offer 2000 Flex points for Rs 400, thus cutting the price of one minute of outgoing calls to 40 paise and one SMS to 20 paise.
Under the new system, this can be done selectively to people who are high spenders, while keeping the prices at higher levels for those who are not big spenders.
This is likely to help the company retain its key customers, especially those who spend a lot of data.
“Vodafone FLEX is available in denominations of ranging from Rs 119 (325 Flex), Rs 199 (700 Flex), Rs 299 (1200 Flex) Rs 399 (1750 Flex). Additional packs can be availed at attractively lower cost,” the company said.
On the other hand, it is also more difficult to market the new concept. For example, Jio can always say it is offering 1 GB of 4G data for Rs 125, but Vodafone can only say that it is offering 1 GB at 1000 flex points, and each Flex point is being offered at 12 paise or 20 paise as the case may be.
Moreover, whether Vodafone is really able to maintain its customer base or not depends on how effectively it can target its high-spenders and reduce its prices for this category of users.
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