Telecom: What Next?
The Indian telecom industry has passed through several turbulent phases & emerged stronger. While mobile telecom services were rolled out in 1995, the high bids thereon made the business plans unviable which necessitated government intervention. The new telecom policy (NTP), in 1999, brought about a seamless transition from a fixed license fee regime to a revenue share one. The NPT also allowed for the entry of an additional operator & drop in peak tariffs which helped all stakeholders: the industry; the government; & the consumer. The operators were relieved of huge upfront payments, the government gained through an ever expanding revenue share pie and higher service tax revenues while the customer gained through price drops courtesy enhanced competition.
The Indian telecom industry has passed through several turbulent phases & emerged stronger. While mobile telecom services were rolled out in 1995, the high bids thereon made the business plans unviable which necessitated government intervention. The new telecom policy (NTP), in 1999, brought about a seamless transition from a fixed license fee regime to a revenue share one. The NPT also allowed for the entry of an additional operator & drop in peak tariffs which helped all stakeholders: the industry; the government; & the consumer. The operators were relieved of huge upfront payments, the government gained through an ever expanding revenue share pie and higher service tax revenues while the customer gained through price drops courtesy enhanced competition.
The industry was well served by an understanding regulator
& enterprising operators. The foresight of the regulator regarding the
policy prescription of calling party pays (CPP) in 2003-as per which a customer
paid only for outgoing calls unlike the case earlier when he had to pay for
both incoming & outgoing - gave a positive spiral to the industry. Likewise,
launch of “lifetime validity” in 2005-06 by the operators expanded the industry
exponentially. Today, commendably, about 93 crore of the 125 crore Indian citizens have mobile
connectivity which has aided commerce, democratized
information & going forward shall be the major vector driving “Digital
India”
Such astounding growth would not have been a reality but for enterprising
operators driving innovations Bharti Airtel, initiated an Indian innovation:
the “Minutes factory” model -wherein fixed costs were converted to variable
costs (capex to opex) through outsourcing of IT, call centres & network
operations. Outsourcing of non-core operations to specialists led to increased
economies of scale & savings thereof which were passed on to the customers
through reduced prices that drove minute elasticity creating a self-fulfilling
virtuous cycle. International
innovations were welcomed & integrated into business models. MTN, South Africa, in a bid to optimize
network utilization is credited to have launched the “dynamic discounting
model”-dropping tariffs, cell site wise, based on location & time of the
day & intimated to the customers through cell broadcasts- which got
replicated, in India, by Uninor. Econet, Zimbabwe pioneered a “location based
management” system-which involved geo tagging of customers, cell site wise which
was of immense help in concluding decisions regarding profitability; this was replicated
in India by Bharti. Zain, Africa, was the first to launch a “one network plan”-that
helped customers to make calls at local rates across 12 countries; this got
replicated in India as the “One India plan” by all operators. Remittance models
launched by SMART Philippines & Vodafone Kenya (M-Pesa) are currently under
replication. Going forward, telcos, if interested, could emerge as large “Payment
banks” thereby entering into the banking domain. That, is only phase 1 of the
transformational exercise currently underway.
Operators continuously seek new avenues for revenue enhancement
not only to satisfy their shareholders but also to pay off for the spectrum
auctions. Airtel made one such attempt to tamper with “net neutrality” by
charging extra for VOIP (Voice over Internet protocol) which received a rebuff
recently. Clearly, preferential treatments or differential treatments to OTT (over
the top) players or other content players, by any operator would be under
severe regulatory scrutiny henceforth, thereby ruling out such revenue
enhancement plays.
That begs the question: what next?
ICE convergence &
Quad Core Play:
ICE -
Information Technology, Communications & entertainment convergence is now a
reality. Recently the Argentina government has allowed for a single licence for
operating ISPs (Internet service providers), tele-communications &
television stations. In UK, key operators are displaying an intent for active quad
core - Mobile, landline, broadband & TV- play. British telecom (BT) which
started a TV channel “BT Sports” in 2012 is now attempting an acquisition of
the mobile business of EE, the 2nd largest operator in UK. Incidentally,
BT, had divested its mobile business, in 2001, to Telephonica, Spain (currently
running as band O2 in UK) & was operating its landline & broadband
businesses alone. The importance of content can be understood from the fact
that BT Sports bid aggressively & won exclusive rights over the EPL (English
premier league) which it intends to bundle with the other services on offer. Vodafone
- a major mobile player - & SKY - a major media player - are therefore planning
interesting counters. In USA we have already seen AT&T DirecTV &
Verizon Comcast tie ups. Similar reactions by operators in India therefore would
not be surprising. Reliance jio has already sounded the bugle by taking over
Network 18 which already owns Eenadu channels & web properties.
Crowdsourcing:
Telcos should work on crowdsourcing
ideas internally, funded in a start-up format, marketed aggressively &
revenues shared with the innovators.
AT&T has already fine-tuned such a model with great success. This initiative
should be supplemented by “appathons” in colleges & schools not only to
create a youth connect but also to strengthen the app ecosystem thereby creating
greater customer stickiness & an additional revenue stream. Such a change
in mindset at telecom firms needs infusion of talent from IT product companies
which is an HR challenge.
Strengthen Enterprise Service
Play:
Telcos should move
beyond their legacy enterprise play by offering data centres & data
security services. They should encourage enterprises on vendor consolidation
& shift their requirements to the cloud. Offerings such as software as a service (SaaS) would provide a
new edge to their SME ( Small & Medium enterprises) drive. Since telcos
already have data analytics specialists, especially in the marketing domain, they
are well advised to hive off the vertical & offer “Big Data & Analytics”
services Valuations commanded by companies such as Mu Sigma indicate that such
a strategy shall be a winner.
Mobile Advertising:
Telcos have captive information on
mobile users which could be utilized for offering personalized mobile
advertising services. Advertisers suffering the ill effects of clutter would be
more than keen to play along.
All this & more, has the potential of bringing telcos in
direct confrontation with IT firms who are strengthening their offerings in
SMAC (social, mobile, analytics, cloud ) domains. The entertainment play shall
bring them in direct conflict with media companies. Therefore, ICE convergence
offers a plethora of options to telcos & each of them has the freedom to pursue
its own blue ocean strategy
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