A Perfect Storm for Mobile Operators

Wikipedia defines “perfect storm” as “an event where a rare combination of circumstances will aggravate a situation drastically.” That is exactly what has happened to India’s mobile operators. Let’s look at what has happened, and then we will look ahead to see what to expect.

It all started with Tata Docomo using pay per second as its entry strategy into the GSM market a few months ago. As the lower part of the pyramid started shifting to it, the incumbents realized that they had little choice but to replicate that. About 20% or so of a telco’s voice revenues are derived from the rounding off of the billing to the nearest (higher) minute.

Next came the cut in roaming rates by 50-60%. Reliance then took the battle to SMS charges launching 1p SMS. In between, came the news of about 20% of users in India having multiple SIMs, which effectively enables them to switch operators.

Voice accounts for 90% of a mobile operator’s revenue, with SMS adding another 5%. The remainder comes under “value-added services” (VAS), with about 40% of that comprising of caller ringback tones (CRBT). From hearsay, even the CRBT absolute subscriber base has stagnated or has been dropping in the past months.

And there’s more to come.

Continued tomorrow.

13 thoughts on “A Perfect Storm for Mobile Operators

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  3. In last three years I used almost all service providers and realized that most of these battles are more of hype and less in delivering value to me.

    When Docomo announces per second billing I wonder if they have changed pricing/plans of some other services.

    A perfect storm for me would be some operator announcing an unlimited data download plan (if not 3g then gprs/EDGE at least) for something around Rs 150 per month. (may be 250 -400 for 3G).

    Just the way our governments believes in keeping us poor I am sure none of these operators actually want to provide a service of that kind. Even if 3G comes I fear they will use the additional spectrum for voice traffic instead of data.

  4. Nicely written.

    The pricing battle is really tough between operators. Airtel CEO Manoj Kohli had already expressed concerns over it. Lets see how long it goes. I feel it will be back to normal soon and every one will start raising the tariff.

    @Ankur – I am using Airtel’s mobile office plan from last 2 years. Its 200 rs. unlimited data transfer per month.

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