‘lifetime prepaid’?

Well, time and mood has come to write a thoughtful or rather insightful post today. I have been goofing around with ‘quotes’ and ‘pics’ to fill in my blog :-). Today’s post takes inspiration with two things. One is the picture below and other from Veer’s post on “number portability in India

IMG_2431.JPG

Veer’s post is sparked from an article in Business Line ‘Test the waters first‘ written by two IBM Business Consulting services people. Quoting important point in the news article:

What will be the right time to introduce Mobile Number Portability (MNP) in India? … TRAI has proposed to increase the coverage of mobile networks in India from around 20 per cent in 2004 to around 75 per cent by 2006 … Clearly, for the next few months, the top-most priority for the Indian market should be the management of this growth. MNP, if it takes focus away from this growth (as the operators claim), should definitely be de-prioritised. …. MNP will definitely increase competitiveness. However, our analysis shows that India is much more competitive (as measured by the share held by the top two operators) than most of the countries where MNP was introduced … Moreover, there is no conclusive evidence that MNP will lead to reduced tariffs. … MNP, if implemented in a consumer friendly manner at the right time, could bring benefits to the Indian consumer. However, the time does not seem to be ripe for introduction of MNP as of now.

Veer disagrees with the argument saying:

I think the primary reason why number portability should be introduced is that service providers should compete to keep the customer and not just forget about him after acquiring by relying on number lock-in …The most flawed argument in the article is that the proportion of churning customers who port with their numbers measures the direct impact of an MNP regime. Number portability acts as a deterrent and makes the operator not take the customer for granted. Porting ratio or churn is not the right measure to calculate the success of MNP.

Before you continue to read, just would like to tell you my take on this. I blog as I think so in a way I don’t know how big this post is going to be. So, just to spare your time – continue reading only if you are interested in what I am telling in the next two sentences. My take on the article in Business Line and topic are as follows:

1. The quality of the article is very poor! I am especially shocked to see two IBM folks have written this and its being published in Hindu. Number portability is a big issue and they have not done a good job! Especially in this complex, competitive, growing indian telecom space.
2. ‘Number portability‘ is the ‘NEED of the HOUR‘ in the Indian telecom industry. So, in a way I agree with Veer. But how I am concluding this from a very different angle.

I am first going to explain the current mobile scenario (to the best of my knowledge) and then look at the options and then conclude. So, if I am wrong somewhere or you want to add something do free to comment this article!

Go up and look at the photo. Its a Ad from ‘Airtel‘ (Bharati) for their ‘Lifetime Prepaid’ offer (if you are reading this from the US, it must be a rude shock! lifetime ‘free’ incoming on your mobile for $20 :D). Also do read my earlier post on the Indian mobile scenario if you want to know the hard facts and backgroung
Current voice schemes:
status check: the prices have hit ‘rock-bottom’

– New one india plan announced by the government and Reliance! i.e call anywhere in India for Rs 1 per minute
– Airtel and orange pre-paid recharge packs are as low as Rs 10! and they are valid for the entire day.
– offer by Reliance to pay Rs 2,500 -> get a new phone + free lifetime incoming calls

In short, voice and mobile have become a commodity. Just to help you realize this more, look at the ad above ‘again‘. It just says soo much! Sorry I didn’t take a better picture, but I took this as I was driving to office. The advertisement hoarding targets everyone in the society … an sales executive, a tiffin dabbawallah, a tea-maker and housewife / teenager. Guess, the only people missing are the kids! (common even they need lifetime offers). Soon with VOIP, for making calls within India, becoming legal in 2007 and broadband penetration increasing, there will be hardly no value for ‘fixed’ voice. And with ‘incoming’ free on the mobile in India. I think it will be only the poor who will be paying for voice and not the rich folks!
So, the mobile operators are left with only two choices:

a. Offer high end services i.e value added services to the high end customers. The customers that they targeted a year or two before and the youths.
b. move in to rural areas and reach to the lower end of customers to get more revenue by keeping the margins, services and ARPUs same.

Basically, its a choice between margin and number game!

Given the fact that they have no means of justifying the need for deploying 3G networks immediately and getting returns on it, the only route that is left in the short term for them is to play the ‘number’ game.

Number portability:

Coming to the main point. India is at a stage where it is adding 5 million customers a month! And the current mobile subscriber strength is around 75 million. So, in short in a year’s time the mobile population is going to double. My question to the IBM authors is – if it is difficult for the operators to deploy MNP now, then its going to be ‘even more’ difficult when the population is ‘doubling’ even year! Every investment and time spent now in getting MNP working is twice the amount and time saved later.

Next point – Out of the 5 million subscribers that are getting added every month, my guess is 60 to 70% low margin customers with lower levels of ARPU. Also, the mobile competition is intense and equal i.e with around a 25% split between mobile operators. There is room for all to grow well. Another thing to note – the schemes like ‘lifetime prepaid‘ are in way locking the customers ‘in’. What will happen to those schemes if the customer decides to change his operator once MNP kicks in? should the new operator honour it??

As of now, without number portability, the current offers will only reduce the churnrate with customers at a loss i.e short term I forsee a mobile landscape in India where the old customer is valued less as he is already ‘locked’ for so called lifetime! The effort will be only to get new customers in!
So, my take – looking in the long term and short term perspective. Number portability is going to only help both the operators and customers in India. The earlier the better!

I feel somehow there is more room for ‘growth’ and ‘competition’, only if TRAI thinks of number-portability across all types of telecom sectors i.e pre-paid, postpaid, GSM, CDMA, WLL, fixed-wireless and Fixed. After all – thats the only way to grow faster and competitively! btw a quick google search reveals TRAI had a ‘open-meeting‘ regarding this in October 2005- any idea what the outcome or the thoughts echoed in that forum were??

A big post … arrgh, I am tired. back to work. Thanks for reading, if you did! 😉

Advertisements

Published by: vinu

My life - BREESY! :-) :D Beautiful Random Enjoyable Eventful Simple Yellow Places I have lived (chronological): (country) (- state) (-- city) India - (Orissa) -- Cuttack (2yrs) -- Bhubaneshwar (3yrs) - (Maharastra) -- Bombay/Mumbai (8 + 1 yrs) - (TamilNadu) -- Madras/Chennai (6 yrs) - (Pondicherry) (1 yr) United States - (California) -- Berkeley (3 yrs) Education : IIT Madras 02, UC Berkeley 05 Work Experience: Mechanical Engineer at FORD Motor Company, India; Management Trainee at Datamatics Technologies Ltd.; Wireless Programmer at TeleCommunication Systems Inc. Passions (currently as of Dec 2005): Family, Media (visual / audio), Mobile Systems, Internet, Design Interests: Music, Movies, Photography, Enjoying nature, Playing Violin, Graphics, Business / Entrepreneurship / Managments, Spirituality, Design, Technology, Mobile / Wireless

Categories india, mobile2 Comments

2 thoughts on “‘lifetime prepaid’?”

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s