‘No merit in going with separate brands’

The coming together of Vodafone-Idea is an amalgamation premised on a high quantum of synergies. Both companies believe that the synergies will pan out over the next few years. Vodafone has an urban appeal. Idea is more small town and rural in its personality. So the two brands complement each other. This makes the merger of the brands a more complex decision.

Let us examine the possible scenarios: Going with two separate brands will be an expensive proposition. To run two brands the company would have to set up competing institutions, parallel structures, which would kill many advantages of the merger. Now if they don’t set up two structures, you would have the same people servicing two brands and there may not be any noticeable differential.

In a two brand co-existence situation, there must be ample differentiation on customer experience. In an oligopolistic structure that the telecom market is in currently in India, this may be a stretch. It would be doable in a FMCG sector in perfect competition for example where there are many brands competing for different slices of the market. But look at Idea and Vodafone, both want a pan India presence, both operate on a price parity with undifferentiated services and play across 2G/3G/4G. Both want to be in the voice and data play and function within a common regulatory structure. In the end the market structure, low return on investment and lack of innovation has not left much ground for differentiation. The brands cannot even be differentiated on price as India is already a low price market. So I don’t see the merit in going with separate brands.

There is another option, create a third neutral brand. But what will the new brand promise? Let us look at the industry situation: Today data is gaining rapidly over voice and brands have to appeal to the data customer which is primarily the youth. Vodafone has an advantage here with its global, younger personality rather than Idea as it is backed by a deep data experience in multiple markets and hence appeals to the data natives. So why kill it? A neutral brand, it would have to pick up a unique positioning and would need to make itself relevant for the data consuming generation, this is what Vodafone is already positioned as.

How must the brands communicate their new relationship? The market is ripe for brand differentiation around video. The past few years, brands have been commoditised to such an extent that they were all equally poor in their customer focus. If the new entity can promise a superior customer experience around video and live up to it, we have a winning proposition.