comparative analysis on the priicing policy of airtel and vodafone

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P ROJECT R EPORT On A COMPARATIVE ANALYSIS OF PRICING POLICIES VODAFONE AND AIRTEL” BACHELOR OF BUSINESS ADMINISTRATION (CAM) Under Guidance Of : Submitted By : Mr. ABHAYA NAND HIMANSHU GAUTAM (HOD) Roll No. : 0171431907

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Page 1: Comparative Analysis on the Priicing Policy of Airtel and Vodafone

PROJECT REPORT

On

“A COMPARATIVE ANALYSIS OFPRICING POLICIES VODAFONE AND AIRTEL”

BACHELOR OF BUSINESS ADMINISTRATION (CAM)

Under Guidance Of: Submitted By:

Mr. ABHAYA NAND HIMANSHU GAUTAM(HOD) Roll No. : 0171431907

JSS Academy of Technical Education

Page 2: Comparative Analysis on the Priicing Policy of Airtel and Vodafone

Noida

Page 3: Comparative Analysis on the Priicing Policy of Airtel and Vodafone

ACKNOWLEDGEMENT

I dedicate this page to convey my deepest and heart-felt appreciation for all those

people who purposefully and inadvertently assisted me in this project. Without

their thoughtfulness, the satisfactory completion of this project would not have

been possible

Firstly, I would like to thank my faculty guide, Mr. Abhaya Nand, who had

supported throughout the entire project.

Secondly, I take the privilege to express my sincere feeling of gratitude to my other

faculties who has always given patient hearing to all my doubts and has been there

to guide me and support me whenever I require his help at any point of time during

the course of my project and who always spared his time and attention for

discussing the problems.

I further want to convey thanks to Ms. Meenakshi Chopra (Floor Manager) to

give me opportunity to get experience.

And my colleagues for their continuous encouragement and support. Last but not

the least I thank the entire people of Delhi who have been a pillar of support for me

and have given me a free hand in choosing my course of life.

A special thanks to all of them.

Page 4: Comparative Analysis on the Priicing Policy of Airtel and Vodafone

HIMANSHU

GAUTAM

DECLARATION

I the undersigned, hereby state that the report titled

“A COMPARATIVE ANALYSIS OF

PRICING POLICIES VODAFONE AND AIRTEL”

Is a genuine and bonafied work under the guidance of Mr. Abhaya Nand (HOD).

All findings are based on data collected from primary & secondary sources and

matter presented has not been copied from anyone else.

HIMANSHU GAUTAM

Page 5: Comparative Analysis on the Priicing Policy of Airtel and Vodafone

TABLE OF CONTENTS

TITLE

ABSTRACT

OBJECTIVES OF STUDY

SCOPE OF THE STUDY

COMPANY PROFILE

INTRODUCTION OF TELECOMMUNICATION SECTOR

METHODOLOGY

LIMITATIONS OF STUDY

ANALYSIS

FINDINGS

CONCLUSIONS

RECOMMENDATIONS

BIBLIOGRAPHY

Page 6: Comparative Analysis on the Priicing Policy of Airtel and Vodafone

ABSTRACT

A prime task of a marketer is to understand the market, his customer and the needs

of the customer and finally look for the best possible way to satisfy the needs of

the customer.

The project undertaken is “A COMPARATIVE ANALYSIS OF PRICING

POLICIES OF VODAFONE AND AIRTEL”. The telecom services have been

recognized the world-over as an important tool for   socio-economic development

for a nation and hence telecom infrastructure is treated as a crucial factor to realize

the socio-economic objectives in India. Accordingly, the Department of Telecom

has been formulating developmental policies for the accelerated growth of the

telecommunication services. The Department is also responsible for frequency

management in the field of radio communication in close coordination with the

international bodies. It also enforces wireless regulatory measures by monitoring

wireless transmission of all users in the country.

The leverage of this project lies in understanding the customer’s knowledge,

awareness and perception about the telecomm Companies, ‘Vodafone and Airtel”

in the telecommunication sector as accompany to subscribe the service. This would

be done, by adopting a research based approach. It deals with customer’s

awareness and involves direct interviews with questionnaire method for market

research.This study will help to report the scope of both the companies in the

market. It also enables the use of various marketing research instruments such as

questionnaires and methodologies like prototyping and articulate interviewing and

also understanding the market condition by taking hypothesis.

Page 7: Comparative Analysis on the Priicing Policy of Airtel and Vodafone

This project will help me to evaluate the perception of customer about pricing

strategy of Vodafone and Airtel. Also this project will give me an opportunity to

gather knowledge about telecommunication sector and customer knowledge.

The project also involves making recommendations, after comprehensive SWOT

analysis that would help both the companies to provide better service to its existing

customers and improve its reach to potential customers. Overall the project would

be a win-win situation for both, the companies Vodafone and Airtel.

1.

Page 8: Comparative Analysis on the Priicing Policy of Airtel and Vodafone

OBJECTIVES OF STUDY

Understanding the customer’s knowledge, awareness and perception about

Vodafone and Airtel as a major company in telecommunication sector.

To find out the share of Vodafone and Airtel in the market at Delhi.

Understand the target customer of Vodafone and Airtel in context to their

pricing strategy.

To understand & know the requirements of the clients

The project will help, know and understand the target customer better and to

know the efforts of both the companies to attract more and more customers.

It deals with customer’s awareness and involves direct interviews with

questionnaire method and check out through hypothesis method. This study

will help to report the scope of Vodafone and Airtel at Gurgaon as a choice

for communication purpose. The project also involves making

recommendations, after comprehensive SWOT analysis that would help both

the companies to provide better service to its existing customers and

improve its reach to potential customers.

Page 9: Comparative Analysis on the Priicing Policy of Airtel and Vodafone

SCOPE OF STUDY

The leverage of this project lies in understanding the customer’s knowledge,

awareness and perception about Vodafone and Airtel separately as an option in

mobile communication services. It will help, know and understand the target

customer better and how to lure them to subscribe more. This would be done, by

adopting a research based approach. It deals with customer’s awareness and

involves direct interviews with questionnaire method for market research followed

by putting hypothesis to understand better. This study will help to report the scope

of the given companies in the market of Delhi as a good company for mobile

services. The project gives an opportunity to understand the changing and varied

customer needs and the pricing strategies that should be adopted by both Vodafone

and Airtel to fulfill them. It also enables the use of various marketing research

instruments such as questionnaires and methodologies like articulate interviewing

and hypothesis testing.

Page 10: Comparative Analysis on the Priicing Policy of Airtel and Vodafone

COMPANY PROFILE

Airtel

Telecom giant Bharti Airtel is the flagship company of Bharti Enterprises.

The Bharti Group, has a diverse business portfolio and has created global

brands in the telecommunication sector. Bharti has recently forayed into retail

business as Bharti Retail Pvt. Ltd. under a MoU with Wal-Mart for the cash

& carry business. It has successfully launched an international venture with

EL Rothschild Group to export fresh agri products exclusively to markets in

Europe and USA and has launched Bharti AXA Life Insurance Company Ltd

under a joint venture with AXA, world leader in financial protection and

wealth management.

Airtel comes to you from Bharti Airtel Limited, India’s largest integrated and

the first private telecom services provider with a footprint in all the 23

telecom circles. Bharti Airtel since its inception has been at the forefront of

technology and has steered the course of the telecom sector in the country

with its world class products and services. The businesses at Bharti Airtel

have been structured into three individual strategic business units (SBU’s) -

Mobile Services, Airtel Telemedia Services & Enterprise Services. The

mobile business provides mobile & fixed wireless services using GSM

technology across 23 telecom circles while the Airtel Telemedia Services

business offers broadband & telephone services in 94 cities. The Enterprise

services provide end-to-end telecom solutions to corporate customers and

Page 11: Comparative Analysis on the Priicing Policy of Airtel and Vodafone

national & international long distance services to carriers. All these services

are provided under the Airtel brand.

Vodafone

Vodafone Group is a mobile network operator headquartered in Newbury,

Berkshire, England, UK. It is the largest mobile telecommunications network

company in the world by turnover and has a market value of about £100

billion (December 2007). Vodafone currently has equity interests in 25

countries and Partner Networks (networks in which it has no equity stake) in

a further 39 countries. The name Vodafone comes from Voice data fone,

chosen by the company to "reflect the provision of voice and data services

over mobile phones.

At 31 January 2007 Vodafone had 200 million proportionate customers in 25

markets across 5 continents. "Proportionate customers" means, for example,

that if Vodafone has a 30% stake in a business with a million customers, that

is counted as 300,000). On this measure it is the second largest mobile

telecom group in the world behind China Mobile. The eight markets where it

has more than ten million proportionate customers are the United Kingdom,

Germany, India, Italy, Spain, Turkey, Egypt and the United States. In the

U.S., these customers come via its minority stake in Version Wireless, and in

the other seven markets Vodafone has majority-controlled subsidiaries.

On 30 May 2006, the company announced a loss before tax of £14.9 billion

for 2005, the biggest loss in British corporate history. The loss for the year

Page 12: Comparative Analysis on the Priicing Policy of Airtel and Vodafone

from continuing operations was £17.2 billion and the bottom line loss for the

financial year was £21.8 billion. The company was pushed into loss by

impairment charges of £23.5 billion, which related to the acquisition of

Mannesmann several years earlier, and losses of £4.6 billion in relation to its

discontinued business in Japan. At an operating level it remained highly

profitable, with an operating profit on continuing operations of £9.4 billion

before impairment costs.

Current report in relation to “Vodafone & Airtel”

Vodafone to invest approximately Rs. 6,700 crores (approx. USD 1.5

bn.) to acquire around 10% in Bharti Tele-Ventures Ltd.

Bharti Enterprises, SingTel and Vodafone to take Bharti Tele-Ventures

Ltd. to unassailable leadership position in India

 

Page 13: Comparative Analysis on the Priicing Policy of Airtel and Vodafone

Introduction of Telecommunication sector

Telecommunications of late has become the backbone of a modern economy. In

fact, the concept of a Global Village is attributable mainly to the rapid advances in

telecommunications. Today, a large country like India with its social, cultural and

geographic diversity can seek to address developmental problems previously

considered intractable, thanks to telecommunications.

 

Largest Network

India operates one of the largest telecom networks in Asia comprising of over

23,406 telephone exchanges, with a total equipped capacity of 21.26 million lines

and 17.8 million working telephones as on March 31 this year. The long distance

transmission network has about 72,592 route kilometers of microwave systems and

about 76,261 route kilometers of optical fiber systems. Fully automatic

International Subscriber Dialing (ISD) service is available to almost all the

countries. In all 11,157 stations are connected to National Subscriber Dialing

(NSD). Maintaining and upgrading this vast network while keeping pace with

every changing technology could be a challenge for any organization.

Earlier, the National Telecom Policy was constituted in 1994 which stipulated for

providing world class telecom services on demand at affordable prices, universal

services covering all villages, a PCO for every 500 persons in urban areas,

protecting India's strategic interests and ensuring that India emerges as a

manufacturing base and a major exporter of telecom equipment.

Page 14: Comparative Analysis on the Priicing Policy of Airtel and Vodafone

Perhaps the most significant aspect of the 1994 telecom policy was the recognition

that telecom was a vital infrastructure, and resources required to meet the

objectives and targets set out were beyond the capacity of government funding and

international generation of resources. Private investment and association of the

private sector was needed in a big way to bridge the resource gap. This was the

beginning of the telecom liberalization in the country.

Speed and Efficiency

That the government will not leave any stone unturned in making India the hub of

telecommunications was once again made clear by the Prime Minister, Shri Atal

Bihari Vajpayee. He has repeatedly advocated to bring speed and efficiency in

resolving the pending issues pertaining to telecommunication.

In the last six months, some major decisions were taken to hasten the growth of the

telecom industry. The Government extended the license period for the cellular

operators to 15 years as India was the only country with a 10 year duration for the

license period. This decision made the cellular projects more bankable. Short

Distance Charging Area (SDCA) was declared as local area from August 15 this

year enabling calls to the adjacent SDCAs, which were being made on STD rates

to be charged as the local calls, at three minutes per call unit.

 

New Telecom Policy

There are some other factors, which necessitate the need for review of the telecom

policy. In 1997, India joined 67 countries in signing a WTO agreement whereby

Page 15: Comparative Analysis on the Priicing Policy of Airtel and Vodafone

the Government of India formalised its commitment to review VSNL's monopoly

over international telecom services in 2004 and review DoT's monopoly over long

distance services in 1999. The Government has decided to disinvest part of its

equity in VSNL and to increase the plan outlay for Communications by 35% as

compared to 1997-98.

Internet Policy

In the recently announced Internet policy, the monopoly of the the Videsh Sanchar

Nigam Limited ( VSNL ) as the country's sole internet provider came to an end.

Two private companies and the Mahanagar Telephone Nigam Limited (MTNL)

have got licences to provide this service.The new policy has incorporated all the

recommendations of the National Task Force on Information Technology . It

allows private ISPs ( Internet Service Providers) to set up their own gateways,

virtually does away with the licence fee and extends the term of the licence to 15

years.The ban on internet telephony, however, continues. At present, 47 companies

have applied to the DOT who will shortly get the licence.

Another landmark: GMPCS

Another landmark event in the history of telecommunications was the launching of

the Iridium system in India on November 1, by linking it to the world's first

satellite telephony system. This event was marked at Iridium India's South Asian

Gateway with three satellite tracking earth stations erected at the VSNL premises

at Dighi near Pune. This gateway is one of 12 such gateways worldwide and will

manage satellite telephony traffic in the South Asian region. Under the Global

Page 16: Comparative Analysis on the Priicing Policy of Airtel and Vodafone

Mobile Personal Communication System ( GMPCS), telephone calls can be made

and received from virtually anywhere on earth.

One Million Subscribers

No doubt there is a lot to be achieved for moving up the present tele density of 1.8

to match the world average of 10. But then India is the first country to reach the

one million subscriber base within the first three years of paging. The USA took 27

years to achieve the same. In cellular also it took China six years to reach 9 lakh

subscribers base, something we did in two years.

According to the industry estimates over the next 15 years, the telecom services

industry is expected to generate around Rs.3,00,000 crore (Rs.3000 billion) and

about 50,000 new jobs. With this kind of framework and expectations, surely, a

new telecom policy will bring reprieve to the telecom industry and telecom will

indeed be the engine of growth in the Indian economy.

The telecom services have been recognized the world-over as an important tool

for   socio-economic development for a nation and hence telecom infrastructure is

treated as a crucial factor to realize the socio-economic objectives in India.

Accordingly, the Department of Telecom has been formulating developmental

policies for the accelerated growth of the telecommunication services. The

Department is also responsible for grant of licenses for various telecom services

like Unified Access Service Internet and VSAT service. The Department is also

responsible for frequency management in the field of radio communication in

close coordination with the international bodies. It also enforces wireless

regulatory measures by monitoring wireless transmission of all users in the

country.

Page 17: Comparative Analysis on the Priicing Policy of Airtel and Vodafone

History of Cellular Telephony

1947 Bell Laboratories introduced the idea of cellular communications with the

police car technology.

1947 The basic concept of cellular phones began, when researchers looked at

crude mobile (car) phones and realized that by using small cells (range of

service area) with frequency reuse they could increase the traffic capacity of

mobile phones substantially. However at that time, the technology to do so

was nonexistent.

1947 AT&T  proposed that the FCC allocate a large number of radio-spectrum

frequencies so that widespread mobile telephone service would become

feasible.

1947 The FCC decided to limit the amount of frequencies available, the limits

made only twenty-three phone conversations possible simultaneously in the

same service area.

1968 AT&T and Bell Labs proposed a cellular system to the FCC of many small,

low-powered, broadcast towers, each covering a 'cell' a few miles in radius

and collectively covering a larger area. Each tower would use only a few of

the total frequencies allocated to the system. As the phones traveled across

the area, calls would be passed from tower to tower.

1968 The FCC reconsidered its position by stating "if the technology to build a

better mobile service works, we will increase the frequencies allocation,

freeing the airwaves for more mobile phones."

1973 (April) The first call on a portable cell phone is made by Dr Martin Cooper, a former

general manager for the systems division at Motorola, who is also

considered the inventor of the first modern portable handset.

Page 18: Comparative Analysis on the Priicing Policy of Airtel and Vodafone

1977 AT&T and Bell Labs had constructed a prototype cellular system. A year

later, public trials of the new system were started in Chicago with over 2000

trial customers.

1979 The first commercial cellular telephone system began operation in Tokyo.

1980 Analog cellular telephone systems were experiencing rapid growth in

Europe, particularly in Scandinavia, United Kingdom, France and Germany.

Each country developed its own system, which was incompatible with

everyone else's in equipment and operation

1981 Motorola and American Radio telephone started a second U.S. cellular

radio-telephone system test in the Washington/Baltimore area.

1982 FCC authorizes commercial cellular service for the USA.

The Conference of European Posts and Telegraphs (CEPT) formed a

study group called the Group Spécial Mobile (GSM) to study and

develop a pan-European public land mobile system.  The proposed

system had to meet certain criteria:

Good subjective speech quality

Low terminal and service cost

Support for international roaming

Ability to support handheld terminals

Support for range of new services and facilities

Spectral efficiency

ISDN compatibility

1983 The first American commercial analog cellular service or AMPS

(Advanced Mobile Phone Service) was made available in Chicago by

Ameritech.

Page 19: Comparative Analysis on the Priicing Policy of Airtel and Vodafone

1987 Cellular telephone subscribers exceeded one million and the airways

were crowded.

1989 GSM responsibility was transferred to the European

Telecommunication Standards Institute (ETSI),

1990 Phase I of the GSM specifications were published.

1991 Commercial launch of cellular service based on GSM standard in

Finland.

 

History of Cellular Telephony History of Cellular Telephony History of Cellular

Te

Page 20: Comparative Analysis on the Priicing Policy of Airtel and Vodafone

1111111111112231111

History of Cellular Telephony in India

1992 Telecommunication sector in India liberalized to bridge the gap

through government spending & to provide additional resources

for the nation’s telecom target. Private sector allowed

participating

1993  The telecom industry gets an annual foreign investment Rs 20.6

million

1994 License for providing cellular mobile services granted by the

government of India for the Metropolitan cites of Delhi, Mumbai,

and Kolkata & Chennai. Cellular mobile service to be duopoly

(i.e. not more than two cellular mobile operators could be

licensed in each telecom circle), under a fixed license fee regime

for 10 years.

1995 19 more telecom circles get mobile licenses

1995(August) Kolkata became the first metro to have a cellular network

1997  Telecom Regulatory Authority of India is set up

1998 Annual foreign investment in telecom stands at Rs 17,756.4

million.

1999 FDI inflow into telecom sector falls by almost 90% to Rs. 2126.7

million

1999  Tariff rebalancing exercise gets initiated

1999(March) National Telecom Policy is announced.

2000(June) FDI inflow drops further down to Rs 918 million coming

2000

(January)

Amendment of TRAI Act.

Page 21: Comparative Analysis on the Priicing Policy of Airtel and Vodafone

Current Status of the Telecom Sector

Introduction

The development of world class telecommunication infrastructure

is the key to rapid economic growth and to bring social change of

the country. Indian telecommunication sector has undergone a

major process of transformation through significant policy

reforms, particularly beginning with the announcement of NTP

1994 and was subsequently re-emphasized and carried

Forward under NTP 1999. Driven by various policy initiatives, the

Indian telecom sector witnessed a complete transformation in the

last decade. It has achieved a phenomenal growth during the last

few years and is poised to take a big leap in the future also. Such

rapid growth in the communication sector has become necessary

for further modernization of Indian economy through rapid

development in IT.

Plan Outlays on Communications

Keeping in view the importance of the sector, an increasing

provision of outlays has been made in the successive Plans.

During the Ninth Plan and Tenth Plan, an outlay of Rs.47280 crore

and Rs.98968 crore were allocated for the communication sector.

As seen in the subsequent paras, plan allocations have helped

Page 22: Comparative Analysis on the Priicing Policy of Airtel and Vodafone

develop and expand the telecom infrastructure, improving the

teledensity in the country over the period.

Plan can be seen from the following chart:

Page 23: Comparative Analysis on the Priicing Policy of Airtel and Vodafone

Expansion of the network

The telecom sector has shown robust growth during the past few

years. It has also undergone a substantial change in terms of

mobile versus fixed phones and public versus private

participation. The following table will shows the growth of telecom

sector since 2003:

Thus, the number of telephones has increased from 54.63 million

as on 31.03.03 to 142.09 million as on 31.03.06, exhibiting a

Page 24: Comparative Analysis on the Priicing Policy of Airtel and Vodafone

CAGR of 37%. Wireless subscribers increased from 13.3 million as

on 31.03.03 to 101.86 as on 31.03.06, exhibiting a CAGR of 97%.

During 2005-06, the wireless connections grew at 78%, whereas

landlines registered a negative growth. The number of Internet

subscribers grew at 25%, while the broadband subscribers grew

from a merger 0.18 million to 1.32 million during the year 2005-

06.

Present status of Telephone network

India’s 164 million robust telephone network, including mobile

phones, is one of the largest in the world and 2nd largest among

emerging economies (after China) with a wide range of services

like basic, cellular, internet, paging, V-SAT etc. The status of the

network is as shown below:

Page 25: Comparative Analysis on the Priicing Policy of Airtel and Vodafone

Further, National Internet Exchange of India (NIXI) has been set

up by DIT to ensure that Internet traffic, originating and destined

for India is routed within India. This will substantially bring down

the cost of Internet usage. It is expected that NIXI will take

appropriate steps for increasing the utilization of such facilities.

Change in composition of sector

Public vs. Private:

Government has taken several steps to encourage participation of

private players to create a competitive environment in the sector.

Consequently, the private sector is now playing an important role

Page 26: Comparative Analysis on the Priicing Policy of Airtel and Vodafone

in expansion of telecom sector. This is also confirmed by the

number of licensees from the private sector in

telecommunications as shown below:

With the opening of telecom sector to the private operators, their

share in the number of subscribers has been steadily increasing

which is evident from the following table:

Page 27: Comparative Analysis on the Priicing Policy of Airtel and Vodafone

The share of private sector in the number of telephones has

increased from 15.12% (6.80 million telephones) in March 2002 to

57.01% (81.01 million telephones) in March 2006.

Mobile vs. Fixed

The preference for use of wireless phones has also been

predominant in the sector. This is confirmed from the rising share

of wireless phones, which increased from 14.85% (6.68 million

Page 28: Comparative Analysis on the Priicing Policy of Airtel and Vodafone

telephones) in March 2002 to 76.18% (129.52 million telephones)

in September 2006.

Trend in teledensity

Page 29: Comparative Analysis on the Priicing Policy of Airtel and Vodafone

Tele density in the country is steadily increasing from 5.11% as

on 31.3.03 to 12.74% as on 31.3.06 and currently stand at

15.12% as on 30-09-2006. However, there is a wide gap between

urban teledensity (47.58%) and rural teledensity (1.84%). The

rural telephony has not kept pace with the impressive growth in

urban connectivity.

Rural Telephony

Apart from the 14.79 million fixed and WLL connections provided

in the rural areas, 551064 VPTs1 have been provided. Thus, 90%

of the villages in India have been covered by the VPTs. More than

2 lakh PCOs2 are also providing community access in the rural

areas. Further, Mobile Gramin Sanchar Sewak Scheme (GSS) – a

mobile Public Call Office (PCO) service is provided at the doorstep

of villagers. At present, 2772 GSSs are covering 12043 villages.

Also, to provide Internet service, Sanchar Dhabas (Internet

Kiosks) have been provided in more than 3500 Block

Headquarters out of the total 6337 Blocks in the country.

Page 30: Comparative Analysis on the Priicing Policy of Airtel and Vodafone

HOW TO DEVELOP A PRICING PLAN

Establish Pricing Objectives

The first major step in the development of a pricing plan is to establish your

pricing objective-whether you intend to implement a lower, higher, or parity

pricing approach relative to the competition. All other objectives, such as increased

sales, higher margins, etc., are overall goals of your business or marketing plan to

which pricing contributes.

Higher, Lower, or Parity Pricing

How you price your product or service has a significant impact on many aspects

of your overall marketing efforts. Used in conjunction with the other elements

of your plan, a given price approach supports your product’s positioning, while

contributing directly to consumer demand (thus sales volume) for your product

and providing income to cover costs and contribute to the profitability of your

firm. Following is an overview of each of the three approaches to pricing.

Parity Pricing

Often referred to as a ‘going rate” strategy, this approach maintains pricing levels

at or near those of the competition. This is appropriate where other means of

differentiation are common or are considered more Important by the target. These

Page 31: Comparative Analysis on the Priicing Policy of Airtel and Vodafone

other forms of differentiation often include specific product features and attributes

as well as non product advantages such as service, guarantees, location for

retailers, or additional distribution channels. Interestingly, it is also utilized when

product differentiation is low and price is the basis of competition. In mature

categories with few competitors and little differentiation, such as the airline

industry, parity pricing is the norm. If one carrier were to raise prices, demand

would shift to the competition with lower prices. If one airline lowers prices, the

others would be forced to lower theirs in response, which would lower profits for

all in the industry and create a price war. Often, in such industries, one major

player, typically the market leader is considered the price leader. Others in the

industry watch this leader for price activity.

Lower Pricing

This objective involves maintaining a price lower than the competition. One

specific execution of this approach includes discount pricing, a direct result of a

low-price positioning. This approach aims for a high volume of sales to offset

typically low margins to achieve desired profit levels (low margin dollars but high

volume). It also requires appropriate capacity and distribution channels to support

the volume requirements. The reasons for a low price objective are usually:

To expand the market, allowing new consumers who couldn’t

purchase at higher prices to become purchasers.

To increase trial and/ or sales due to price incentives.

Page 32: Comparative Analysis on the Priicing Policy of Airtel and Vodafone

To take advantage of a strong price-elastic product for which a low

price generates increased demand. The result is lower margins but

increased profits because of the increased volume.

To preempt competitive strategies, helping to steal market share. This

is often necessary in a mature market.

To remain competitive with your competition. If a majority of the

competitors have reduced their prices, oftentimes you will need to do

so, especially if you are in a price-sensitive product category. If a

strong competitor is also offering an attribute such as service with

which you cannot compete, you may’ need to lower your price to

counter the service offering.

To keep competitors from entering the marketplace by having a price

that is difficult for a new company with high initial investment costs

to match. This - policy of expanded market pricing allows a company

to develop a large, loyal consumer base while keeping competition to

a minimum.

Higher Pricing

As we have discussed many times, a premium price-a higher prices relative to the

competition-supports a quality positioning and provides high margins to support

higher product and promotional expenditures. The reasons for a high price

objective are usually:

Page 33: Comparative Analysis on the Priicing Policy of Airtel and Vodafone

A need for a fast recovery of the firm’s investment.

A need for faster accumulation of profits to cover research and development

costs. The profits can then be used to improve the product and to sustain

competitive marketing tactics once competitors enter the market.

To substantiate a quality image positioning.

The product is price inelastic-the demand or sales decrease only marginally

with higher pricing.

The product or service is in the introductory phase of its product life cycle

and represents a substantial innovation within the product category. Also,

the company may wish to skim profits while there are no substitute products

to force competitive pricing.

The company is stressing profits rather than sales; thus margins must remain

high.

The product has a short life span. An example would be fad products which

last for a relatively short time. This necessitates a high price policy which

will help recover the firm’s research and development costs in a short time

period.

The product is difficult to copy and reproduce or has patent protection.

Page 34: Comparative Analysis on the Priicing Policy of Airtel and Vodafone

Current report in relation to “Vodafone & Airtel”

Vodafone to invest approximately Rs. 6,700 crores (approx. USD 1.5 bn.) to

acquire around 10% in Bharti Tele-Ventures Ltd.

Bharti Enterprises, SingTel and Vodafone to take Bharti Tele-Ventures Ltd.

to unassailable leadership position in India

 

Significant Highlights:

The largest single foreign investment ever in the history of India

The largest investment in the Indian telecom sector

Bharti establishes its supremacy in the Indian telecom market, having

attracted Asia’s best – SingTel, and now world’s best – Vodafone.

Bharti set to gain global leadership in the telecom sector.

Bharti Enterprises continues to hold shareholding and management control

in Bharti Tele-Ventures.

 

New Delhi, October 28, 2005: The world’s leading mobile telecommunications

company, Vodafone Group Plc. (Vodafone) has secured around 10% interest in

Bharti Tele-Ventures Ltd. (BTVL), India’s largest private sector telecom company.

Vodafone, through Vodafone Mauritius Ltd., has contracted to subscribe shares in

Bharti Enterprises, giving it a beneficial stake in BTVL of 4.4%. In addition

Vodafone, through Vodafone International Holdings BV, has also picked up 5.65%

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stake from Warburg Pincus, thereby taking the total beneficial interest in BTVL to

around 10%. Vodafone has made a total investment of approximately Rs. 6,700/-

crores (approximately USD 1.5 bn) to acquire around 10% interest in BTVL,

including the acquisition of shares held by Warburg Pincus. Bharti Enterprises

maintains a controlling interest of 45.9% in BTVL through its subsidiary, Bharti

Telecom Ltd. With the final sale of its stake, Warburg Pincus has now completely

exited its position in BTVL.

Commenting on this historic development in the Indian telecom market, Mr. Sunil

Bharti Mittal, Chairman & Group Managing Director of Bharti said “We are

delighted that Vodafone has made a call on the Indian telecom sector and has

chosen BTVL to be the vehicle to develop its continued interest in the Asian

region. Bharti has had the privilege of tying up with ‘best in class’, blue chip

companies, from around the world who have come and joined hands with Bharti, at

different stages, to develop the telecom sector in India. At the time when the

western world started hanging up on India, it brought in Asia’s telecom

powerhouse, SingTel, to replace Telecom Italia and British Telecom. SingTel

helped Bharti with the capital and strategy to grow from a mid-size telecom

operator into India’s largest telecom company. Warburg Pincus, making its second

largest investment in the history of the firm, supported the company in developing

the strategy and investor focus, in its public listing and in the process making

Bharti one of the best investments ever undertaken by Warburg Pincus around the

world. Today, when Bharti stands on the threshold of being an Asian telecom

powerhouse, it has tied up with Vodafone to take the company to the next level and

to support Bharti in achieving its vision of making Airtel the most admired brand

in India. Bharti is fortunate to have four strong pillars to achieve its vision. The

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entrepreneurial leadership of Bharti Enterprises, the Asian telecom powerhouse –

SingTel which will continue to be our leading partner, the world’s largest telecom

operator – Vodafone and, the most important one, a world-class management

team.”

 

Chief Executive Officer of Vodafone Group Plc., Mr. Arun Sarin, speaking on

the occasion, said “I am delighted to announce this strategic partnership with

BTVL, the leading national mobile operator in India. Together we will take this

venture to a new level as clear leader in this market. We are entering a relationship

with a major company, which shares our vision and values and understands, as we

do, the enormous potential of mobile telephony in society. This transaction is

consistent with Vodafone's strategy of developing our global footprint in growth

markets, where we can create value for shareholders.”

 

Chief Executive Officer of SingTel, Mr. Lee Hsien Yang, speaking on the

occasion, said “We entered into India through a partnership with Bharti Enterprises

at a time when many were skeptical about India’s telecom story. We are delighted

that Bharti, with SingTel’s support, has successfully executed its growth strategy.

Bharti’s entrepreneurial spirit and innovative culture continue to drive the

company’s growth. Today we are pleased to welcome Vodafone as our partner to

further develop the Indian telecom market and to take Bharti to greater success.”

Commenting on the transaction, Warburg Pincus Co-President Chip Kaye said:

“We are proud to have been part of one of the most compelling growth stories in

India’s history. Having invested in Bharti in 1999 and working closely along the

way with a world-class management team and a leader of the caliber of Sunil

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Mittal, it is gratifying to see the company take this step toward its next phase of

growth.” Dalip Pathak, the Warburg Pincus senior partner who oversees the firm’s

Indian investment portfolio, added: “Bharti is now truly a world-class company

and as we depart, we wish the company well and are confident that it will continue

to attract interest from investors around the world.”

 

About Bharti Televentures

Bharti Tele-Ventures is one of India's leading private sector provider of

telecommunications services with an aggregate of 15.13 million customers as of

end of September '05, consisting of approximately 14.07 million mobile customers.

The company is the only operator to provide mobile services in all the 23 circles in

India. The company also provides telephone services and Internet access over DSL

in 15 circles. The company complements its mobile, broadband & telephone

services with national and international long distance services. The company also

has a submarine cable landing station at Chennai, which connects the submarine

cable connecting Chennai and Singapore. The company provides reliable end-to-

end data and enterprise services to the corporate customers by leveraging its

nationwide fiber optic backbone, last mile connectivity in fixed-line and mobile

circles, VSATs, ISP and international bandwidth access through the gateways and

landing station.

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Pricing Strategy of Vodafone and Airtel

Various tariff plans of Vodafone

(Prepaid):

Recharge cards

MRP MRP

(Rs)(Rs)

TalktimeTalktime

(Rs)(Rs)

Access Access

Fee (Rs)Fee (Rs)

Validity Validity

(Days)(Days)

Equivalent mins.Equivalent mins.

25 19.75 2.50

55 43.95 5 0 24

115 92.35 10 0 50

199 100 77.11 30 50

350 181.5 130 30 98

400 226 130 30 122

600 404 130 30 217

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Various tariff plans of Airtel

(Prepaid)

ppp

10 5.90 3 1.10 0 90 4

25 19.25 3 2.75 0 90 11

55 40.95 8 6.05 0 90 24

99 0 88.11 10.89 30 (Lifetime

Validity Offer)

90 0

125 96.25 15 13.75 0 90 54

200 103 75 22 30 90 52

345 177.05 130 37.95 30 90 90

390 217.10 130 42.90 30 90 111

590 395.10 130 64.90 30 90 202

1175 895.75 150 129.25 60 90 457

3500 2814.99 300 385.01 366 90 1433

102 306(Local

A-A)

90.78 11.22 30(Tariff Validity) 90 306

Page 40: Comparative Analysis on the Priicing Policy of Airtel and Vodafone

PRICING STRATEGY OF VODAFONE

At Introduction Stage of their operation in India:-

They are setting price because they have a new product, and they are

entering into a new market with an existing product.

How?

Penetration pricing.

Charging a low price when entering the market to capture market

share.

Need to decide what position they want their product to be in.

Possible Pricing Objectives

Profit objectives e.g.

Targeted profit return: The main objective of every company is

to maximize profit from their investment in the business.

Volume objectives e.g.

Dollar or unit sales growth : One of the major objectives is to

concentrate towards the volume and sale of volume of the

product at a constant rate.

Page 41: Comparative Analysis on the Priicing Policy of Airtel and Vodafone

Market share growth : Along with profit and sales maximization,

growth in market share is also a bigger part of the business for

the company.

Other objectives e.g.

Match competitors’ price : One of the main objectives of

Vodafone at the recent time is to maintain parity price taking

care of the pricing strategy of the competitor companies.

Non-price competition: being a new company in Indian telecom.

Sector it is basically necessary to improve their image and

goodwill in the market with comparison to the image of the

competitors and that comes in non- price competition.

Page 42: Comparative Analysis on the Priicing Policy of Airtel and Vodafone

Demand Analysis as a part of pricing strategy

Measure the impact of price change on total revenue:-

At the initial stage of the company in the Indian origin, it is important

to find out that whether the pricing strategy of the company has any

impact on the customers or not. It is very much important to analyze

the demand of the product of the company by various levels of the

customer.

Predicts unit sales volume and total revenue for various price

levels:-

After setting the price, it became important for the company to forecast

the sales volume and total revenue needed for future.

Different customers have different price sensitivities and needs:-

It is important for the company to understand the fact that in India,

various customers have their different tastes and priorities. So, the

company is emphasizing on understanding the demand, taste and need

of the customers to standardize the products of the company.

Page 43: Comparative Analysis on the Priicing Policy of Airtel and Vodafone

Impact of other factors over the pricing strategy of

Vodafone

Customers’ ability & willingness to buy:

The ability and willingness of the customers has a great impact over

the demand of the product which in turn influence the pricing strategy

of Vodafone.

Customer lifestyle:

Pricing strategy of Vodafone greatly varies as per the lifestyle as well

as location of the services of the company.

Benefits sought:

Where there is benefit, customers run towards it. So Vodafone is trying

to serve maximum benefits to the customers in the form of various

schemes both postpaid and prepaid.

Characteristics of the product :To fight with the competitors, the

company is trying to add maximum characteristics to each product.30

Page 44: Comparative Analysis on the Priicing Policy of Airtel and Vodafone

PRICING STRATEGY OF AIRTEL

Skimming pricing

Charging a high price initially and reducing the price over time:-

“Airtel has reduced the price of its starter pack in the prepaid segment

in Chennai. It will offer a student prepaid starter pack at Rs 149 — cost

reduced from Rs 224”.

One time when Airtel was a leader in telecomm sector, it had high

costs of its product but after the entrance of various other competitors

in the market, it significantly reduced its price of the product which has

major impact over the services of their product.

Maintaining Quality

By maintaining quality of their products and services they became able

to maintain their introducing price over a long time.

Positioning Airtel as an aspiration and lifestyle brand

The target customer was clearly defined: elite, up market professionals

and entrepreneurs. “They became able to position Airtel as an

aspiration and lifestyle brand, in a way that trivialized the price in the

mind of the consumer. It was pitched not merely as a mobile service,

but as something that gave him a badge value. In a service industry like

telecom, people live a brand 24X7. It's all about experience; and for

Airtel 'brand=customer experience.

Page 45: Comparative Analysis on the Priicing Policy of Airtel and Vodafone

Price-Flexibility Strategy

Flexible-price policy—setting different prices in different markets

based on:

Geographic Location:- Airtel is trying to put price flexibility as per

Location.

Time of delivery:- Delivery of services matters a lot to improve image

of the company, so Airtel believes in providing correct product at

correct time.

The complexity of the product:- Pricing of Airtel also depends on the

complexibility of its product and span of availability.

Page 46: Comparative Analysis on the Priicing Policy of Airtel and Vodafone

METHODOLOGY

Target population People subscribing services of Vodafone/ Airtel

Type of sampling Convenient Sampling and Hypothesis testing

Sample size 100

Due to time and accessibility constraints sampling was adopted and the sample size

was limited to 100.

1) Interacting with people who use to subscribe the mobile services of

Vodafone and Airtel, to have their view.

2) Prepare a questionnaire and getting it approved by faculty guide and get it

filled by visiting customers and with whom the meeting takes place.

3) The analysis of the data collected through questionnaire has been done with

the help of the results derived from MS-Excel.

4) Reference to secondary sources of information which include study of

relevant books, magazines etc., and use of literature from Internet (articles,

surveys etc.)

Page 47: Comparative Analysis on the Priicing Policy of Airtel and Vodafone

5) Discussion with faculty guide and professionals has been undertaken. Based

on the interactions, secondary and primary research, the analysis and

recommendations has been made.

6) Putting hypothesis on the basis of views of customers and to perceive the

realty about the assumption taken in context to study the comparative

analysis of pricing strategy of both the companies.

Page 48: Comparative Analysis on the Priicing Policy of Airtel and Vodafone

LIMITATIONS OF STUDY

The report does not take into consideration extraneous factors such as time

given by different interviewees for the interview and the attitude towards

answering specific questions such as categorizing of commission rate into

poor, good, average etc.

The report does not also include any provision for the change in attitude of

the respondents in future.

The report does not give a single full proof recommendation for improving

the product offering and advisory services to each and every potential as

well as existing customers.

Personality differences between respondents.

The persons surveyed may not give correct information as the data is

generally related with the financial gains of the person concerned.

Page 49: Comparative Analysis on the Priicing Policy of Airtel and Vodafone

ANALYSIS

Customers are more sensitive to price changes if the products cost a

lot and/or are bought frequently

Competitors may see each of price change as a fresh challenge and

react according to its self-interest at the time. Need to estimate each

close competitor’s likely reaction.

Both the companies trying to measure the impact of price change on

total revenue.

The Vodafone has an idea is to maximize the profits of the entire

organization rather than that of a single product or a single line

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FINDINGS

Majority of the people has been subscribed to Airtel due to its various

value added features. Vodafone is a new company in India, so it needs

span of time to stand in that level.

Vodafone is trying its best to increase its market share through parity

pricing and penetration strategy. It’s offering reduced price for the

products through various schemes to attract various levels of

customers. On the other hand Airtel which had fixed and high strategy

of pricing, also trying to reduce its cost to expand the level of

customers.

Vodafone is trying to expand its span through efficient promotion and

stimulated reduce pricing where as Airtel is trying to standardized its

services through flexible rating at various locations of India.

Page 51: Comparative Analysis on the Priicing Policy of Airtel and Vodafone

CONCLUSIONS

Airtel seems to have consciously decided to go for the belly of the

market and aggressive market expansion, while Vodafone seems to be

pursuing a relatively more sophisticated consumer. There isn't a great

deal of differentiation in terms of pricing, services, schemes and so on,

but there are differences in approach. Overall, AirTel is focused on

functionality and efficiency, while Vodafone has veered towards

warmth and emotions.

Page 52: Comparative Analysis on the Priicing Policy of Airtel and Vodafone

RECOMMENDATIONS

As majority of people were aware of Hutch, but after acquisition by

Vodafone, Vodafone needs to evolve through its balanced pricing

strategy.

It should try to attract customers by offering flexible pricing. On the

other hand Airtel is already a established company with a big

expansion. But to stand the competitions from the companies, it

needs to reduce its price to come more close to the customers.

Electronic media/Hoardings are the major medium which attract

majority of people towards the company. So company should focus

on these two medium to attract more and more people towards the

company.

People of young age attract more towards the new offers provided

by the company. So the companies should focus more on youth’s

segments.

Page 53: Comparative Analysis on the Priicing Policy of Airtel and Vodafone

Company should also concentrate more on quality of services to

grab major segments.

To understand the customers and their requirements, they should go

for market research after every duration of time.

Page 54: Comparative Analysis on the Priicing Policy of Airtel and Vodafone

BIBLIOGRAPHY

Websites :-

www.bharti.com

www.vodafone.com

www.google.com

www.Wikipedia.com

Magazines :-

Business world

Books:-

Marketing Strategies (Sudhir Chawla)

Research Methodology (C.R Kothari)

Marketing Management (Philip Kotler)