Vodafone: Competition or collaboration?

With the British telecom major Vodafone having bought a majority stake in Hutch Essar, the rules of the game in India’s booming telecom sector are set to change. While the existing telecom players - especially the big boys like Bharti Airtel and Reliance Communication will find the going tough, the expectation of people from the British telecom giant will be far higher than it has been and the company must try to meet the expectations of its customers.

Both Bharti Airtel and Reliance Communication have gone on record about their determination to counter the possible challenge from Vodafone. The Chairman and Managing Director of Bharti Airtel, Sunil Mittal on Monday said the company would up the ante knowing that Vodafone would come hard to grab more market share. Chairman of Rel Comm Anil Ambani has also lined up an extensive capex plan going forward.

While the entry of Vodafone in India, the fastest growing among the emerging markets in the world, will certainly alter the dynamics in the telecom sector, this will also unfold a good range of opportunities for collaboration between players aimed at cost-cutting and better services. Almost in tandem with winning the Hutch bid, Arun Sarin, CEO of Vodafone, announced his company’s plan to collaborate with Bharti.

Sharing the tower infrastructure with other players also makes a lot of business sense for all. While it unlocks a lot of value for the owner of these towers, it will make a lot of commercial sense for the players who will be sharing it without having to own it. This is especially important for a sector which, going forward, will see its returns only thinning out--a phenomenon currently being seen in the West.

Bharti has signed an infrastructure sharing agreement with Vodafone, which would allow both operators to share nearly 70,000 mobile towers across the country. Bharti would also be Vodafone's preferred long distance telephony service provider. Mittal has said that the agreement would lead to huge savings for both the companies. Bharti would make Vodafone its preferred roaming partner, as per the agreement. All this could well fit in to the broader strategy of cooperation to cut down on costs.

In a way, Vodafone is banking heavily on effectively leveraging infrastructure-sharing arrangements, value-added and innovative schemes, which are its forte worldwide and capitalise on 3G services over the next few years.

All in all, India's telecom scene is all set to see an interplay of cooperation and competition in the days to come.