Change Is Imminent

Written by Rachana Khanzode | Nikita Upadhyay | Nikita Upadhyay | Updated: May 26 2009, 06:59am hrs
It can strike anytime, anywhere. You might be traveling peacefully in a train or a bus, or simply sitting at home relaxing in front of the television set while catching up with a friend or family via your all-weather mobile phone.

The conversation gets juicier. The call drops. You go, Hello! Hello!.

Remember the waiter at the swank restaurant calling out the menu and doing the hello, hello number in a recent Tata Indicom ad Or the man in the bus discussing Dadas future as a cricketer with a co-passenger and interjecting his tirade with, you know it, hello, hello Or the housewife dangling precariously from her balcony, trying to catch bits and pieces of the conversation she started a minute before At some point we are sure, your fancy Nokia, Motorola or Fly Mobile would have come to naught. Courtesy some unknown network error.

Well, there is hope. Come September and those of you cribbing about your network provider and frequent call drops can switch to a new service provider without changing the existing mobile number. After a long wait, mobile number portability (MNP) will be implemented by then.

Of course, MNP brings a number of challenges for service providers in terms of finding new ways and means to retain the high-value post-paid consumer without alienating the highly promiscuous pre-paid one. The network movement would cost a subscriber just about Rs 300 and this may not be such a bad deal for a subscriber who is already shelling out a good amount to the service provider every month. Analysts believe that it is the pre-paid subscribers, who already have a high churn rate of about 40%, who would rapidly move in and out of networks after MNP coming into force.

Pre-paid customers are usually the subscribers who budget their mobile spends, but these need not necessarily be low spenders. At the same time, a pre-paid subscriber is also increasingly looking at better services, just like his post-paid brethren. Interestingly, the post-paid additions are also shrinking and have come to stand at 7-8% of the net additions by service providers every month.

MNP would therefore demand investment in terms of the network upgradation and for the older telecom players it would be more significant. Girish Trivedi, deputy director, South Asia Middle East (ICT practice), at Frost & Sullivan, says, At an individual level, a churn may not matter much but when an enterprise customer moves out from a service provider it can bring huge revenue losses that could run into crores of rupees.

Also initially MNP will have to face up to certain technical challenges. Richard Jacowleff, president, interconnection solutions, Telcordia Technologies, says, The timeframe required for operators to adopt this technology would really depend on the kind of infrastructure they have. The new players will be investing less than the incumbents for sure.

Service providers are also expected to bring in improvements in their customer service capabilities. Adoption of mobile device management (MDM), that would enable call centre executives to have all the required information about a subscriber when he makes a call, will drastically improve the service quality. A call made to the call centre lasts about 20 minutes at the moment, which costs the operator Rs 7 per unit. MDM will reduce the call time to about 10 minutes, making possible huge savings by the operator. Net-net, this would help the operator save an amount of about Rs 400 crore in three years, explains Fooming Hoh, vice-president, sales, APAC, InnoPath Software.

K Raman, practice head, telecom, media and technology, Tata Strategic Management Group, says, Service providers need to rework their distribution channels and communication strategy in a bid to improve consumer spending. Sunzay Passari, vice-president, value added services and devices, Loop Mobile, adds, Once the operators move-on to the MNP technology, they will face initial glitches in term of billing and charging subscribers. The tariffs in India are the lowest in the world and so specific and targeted value added services (VAS) would emerge as a major subscriber retention and acquisition strategy.

So, besides the network investments to improve on voice quality, service providers would have to explore opportunities in VAS services to stay in the race. More so because they have already chocked the market with offers of free lifetime validity and low per unit call charges. Nevertheless, this shift in focusfrom voice to VASon the part of service providers is expected to change the market for VAS providers, who have been struggling for long to stay afloat.

Typically content developers get about 20% of the revenue, while operators keep a lions share. This, say content developing companies, would shift to 40:60 or 50:50. Ronan Casey, CTO, Asia Pacific for Acision, says, It would be a daunting scenario for the operators because content developers might just bypass them and connect to their target audience directly just like Apple and Nokia have done through their exclusive stores. Nokia is expected to launch its Ovi stores in the next few months.

In other words, the entire telecom market will see a big shift as players get ready for the second phase of expansion. The new telecom operators such as Unitech Wireless, Aircel, Shyam Sistema, Loop Mobile among others, that got their licenses last year and will be rolling out their services this year, are expected to be under pressure. This is because the competition this time will be much more intense than what it was when players such as Bharti Airtel and Reliance Communication started out and had to face competition from state-run players BSNL and VSNL, that were not as aggressive as private operators. The new players will have to look at VAS more aggressively.

Raghunath Mandava, chief marketing officer, Bharti Airtel, says, We will be introducing various services and bring engagement kind of services with our customer base. Our start and stop service is just one of them. These are meant to empower our subscribers and going ahead we will introduce similar initiatives.

Interestingly, most of the players at the moment are looking seriously at rural market penetration in terms of VAS, besides targeting the sophisticated urban market. The countrys largest service provider Airtel, that has been foraying into the rural markets with its voice services very aggressively, is also keen on rural VAS. It plans to tap the rural data market in a big way.

For its part, Reliance Communications is already planning various rural initiatives. Krishna Durbha, head of VAS business and marketing, Reliance Communications, says, The next market for us is the rural where we will be introducing various VAS initiatives aggressively. We will also be looking at innovative billing solutions like micro billing and bringing in various value-for-money products. For urban areas we already have services in place like Live TV, though we are waiting for certain regulatory approvals.

New entrants like Aircel feel that rural telecom space calls for innovation in the VAS space. For rural areas, just the agricultural, market or the veterinary tips would not suffice. We would like to take forward education and the healthcare programmes for the rural area, said Gurdeep Singh, COO, Aircel.

The urban VAS market is dominated by astrology, Bollywood and cricket-centric services. Content developers are working hard to innovate in the VAS market and bring in more variants to cater to the urban mobile mass. One-button or one click experience would dominate the mobile user experience in the future. The mobile device is now used either to kill time or to fill time. VAS would graduate from being just Bollywood centric, that is, entertainment, to infotainment. It would be developed for the businesses and according to the enterprise requirement, adds Singh.

Analysts say video-on-demand, radio-on-demand, music-on-demand etc would be consumed heavily after 3G hits the ground. Now VAS comprises 8-10% of the revenues but in three years could go up 13-15% and, in the long term to 25% of the total revenue as in developed countries. Countries such as Japan and Korea get almost 30-40% of their revenues from VAS. By 2012, VAS is expected to contribute about 20-25% of an operators revenue, predicts SS Sirohi, deputy director general, ITS, VAS, BSNL.

If all goes well, MNP would help to tap the m-payment opportunity in India. Companies like mChek will resort to expanding the micro-financing arena. Today mobile payments are used by a small segment of the mobile users. In the fiercely competitive telecom market, operators will tend to switch to and promote the most convenient and a method which will enable value for money, hopes Sanjay Swami, CEO, mChek.