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.

Published by

Rajesh Jain

An Entrepreneur based in Mumbai, India.