As number portability threatens to increase churn, telecom operators are innovating on the tariff front. Telecom experts say that roaming revenue comprises around 10-12% of an operators earnings. Ramesh Menon, CEO, mobility, Mumbai, Maharashtra and Goa, Bharti Airtel says, 36% of 115 million customers travel on the Airtel network. Research has shown that customers need benefits while traveling and are not satisfied with just local calling benefits. You would notice that most of the intra or inter city or regular outstation travelers are shy of talking on the phone.
It is pertinent to note that Airtels premium tariffs on roaming services were reduced in order to retain its higher end subscribers and prevent churn. As per a report by HSBC Securities, premium tariffs on roaming services for Bharti accounted for almost 15% of prepaid revenues and about 20% of post-paid revenues. We expect the disruption to continue for some moretime, as new entrants like Etisalat and Telenor are yet to launch services. This phenomenon will only add to pricing pressures and aggravate investor concerns on industry fragmentation. We view sector consolidation, 3G services, and market-linked 2G spectrum policy as the swing factor for the stock, the report adds.
Nevertheless with intense competition, the telecom operators are forced to cut down their roaming charges, which according to the experts, will impact and lead to a decline in their roaming revenues by 6%. Abraham Punnoose, vice-president, marketing and business development, Roamware says, Given that many of the Indian operators have pan-India presence, this revenue could be across circles within India and in some cases like loop telecom and the new licensees (limited coverage) would be from roaming into the other networks within India. Elaborating on his point he adds, Given that national roaming rates were already in the Rs 1.50 range, it will impact revenues in the short term. However, the incremental traffic could potentially restore revenues in the 18-24 month window.
Interestingly, the telecom operators justify their move to cut roaming charges with a hope that subscribers tend to make long duration calls on long distance and thus will boost domestic long distance traffic for the operators. Deepak Gulati, president, Tata Docomo says, In the last few months, almost all telecom service providers have renewed their tariff structure and are now offering 1 paisa per second, a revolution led by Tata Docomo. Reduction in roaming rates is definitely a good move and will work in the interest of the consumer. The impact is going to be strong enough as its a revolutionary value proposition; the move is set to redefine the very concept of making calls while roaming in India.
Indian telecom markets are all about scale, which is evident from the fact that regional telecom players have attempted to go pan-India from their regional status. For instance, Aircel and Idea Cellular have gradually expanded from their regional status and achieved pan-India operations. The regional status of operators implies that they are dependent on large players for roaming services, in areas where they do not have their own network and coverage. With tariffs so low, they end up subsidising roaming calls.
Similarly, despite branding on a national basis, regional operations limit their capabilities to achieve more effectiveness with their marketing spend. Pradeep Shrivastava, chief marketing officer, Idea Cellular says, Idea Cellular will continue to be competitive in the tariff war. We will never be the discounted player but neither will we charge premium to our subscribers. In the past, telecom industry had a wide variety of tariff packages and with the entry of new players, these have increased further. We will proactively give those tariff that are suitable to our users and for others which are not, we will at least respond in a finitetime.
Interestingly, the move for reducing roaming charges was again driven by tariff pressures. Hence, the move by other operators to follow suit will be an interesting trend to watch out for.
Going forward, analysts believe that value added services (VAS) would be another area where one can look at competitive pricing. SMS charges in India are the only tariffs which have been immune from the fall witnessed in rates across the board.
According to research and consulting firm Gartner, Indian mobile messaging volumes are expected to reach 191.6 billion messages in 2013. It further adds that by 2013, India would have more than 750 mobile connections. Therefore, if you see the SMS usage per user would essentially drop. However, the overall large base of mobile connections would support this SMS volume. Recently communications minister A Raja had called up on the mobile operators to reduce the tariffs for SMS on the lines of tariff cuts for voice services.
Telecom experts opine that with the internet on a personal computer having sort of stagnated at 5-6% penetration in India, mobile data could well repeat the story of voice connectivity once again. Vikas Saxena, country head, Nimbuzz, believes that bringing down GPRS data rates and more flat rate data plans will surely help in explosion of data usage. This will be duplication of what happened on voice business where falling voice tariffs led to a revolution of sorts in India bringing millions in the fold of telephony.
Reducing data tariffs will have a similar impact on expanding the internet user base of the country, he adds.
Meanwhile, the recent move by Aircel where they launched data scratch cards has done wonders for their data revenue and penetration of data among their subscriber base. Essentially, this shows that at lower price points, there are subscribers who would take up the data more enthusiastically.
Saxena says, Countries similar to India in purchasing power, say Indonesia or Philippines, are setting the example where more and more percentage revenue of a mobile operator is coming from data enabled services. I believe this is harbinger of the times to come.
In addition, social networks are one of the areas where mobile data connectivity will be key in the coming months. With virtual goods industry flourishing on the personal computer globally, mobile is the next logical shift; a trend already demonstrated in countries like Japan and Korea. This would be one big area where mobile operators can look to enhance average revenue per user (ARPU).
Also, international roaming is another potential area that Indian operators can look at cutting rates. Roaming revenues comprise 3-5% of an operator's revenues. However, to achieve discounts in that area, operators in India would need to work with their roaming partners overseas. With international outbound travel from India growing exponentially, more and more customers are now using their phones in the international roaming environment. Apart from tariff reduction, there is an immediate need for measures to enable tariff transparency and usage triggers for international roaming customers on voice and data usage, so as to enable to them control their expenses appropriately.
Without any doubt, mobile number portability (MNP) will bring in some challenges on the churn front in the short term with the consumer enjoying the right to move to another network while retaining the number. Data services present the single biggest opportunity within the Indian mobile landscape. The release of the 3G spectrum and its subsequent roll out would have a significant impact from an infrastructure perspective where data services could be made available for customers on the move and remote areas.
Punnoose says, In addition to the spectrum and consequent 3G infrastructure rollout, there is a need for applications targeted at financial inclusion, micro finance and mobile wallets for the economically disengaged majority population in our country. Mobile holds the promise of enabling financial inclusion and mobile coupled with data services have the potential to change the landscape on the financial inclusion front resulting in overall development and well being for millions in our country.
But keeping the ongoing tariff wars in mind, it seems the customer is really the king.