Mobile operators in India have long focused on voice services and new customer acquisition. I have long argued that this strategy has severe limitations since voice pricing can and has to be matched by everyone else. Thus, all it does is give one a fleeting advantage in the marketplace, and that too, for the lower part of the subscriber pyramid.
The real value lies in the 100 million subscriber base at the top of the pyramid. These subscribers want more than just voice. Their data needs have not been fully addressed by the operator portals and VAS services. The result is that VAS in India is still at 10% of revenue, with half of that being accounted by P2P SMS.
In other emerging markets (Latin America, China), VAS is at over 20%. If India can double the contribution of VAS, it can add another Rs 10,000 cr to the operators, with very high margins. This can offset the declining revenues from voice and SMS.
This is easier said than done. Operators, historically, have focused on the voice component. Making the shift to thinking non-voice and data is not going to be easy. In my view, the ones who can make this transition are the ones who will emerge stronger from the ongoing and coming battles.
So, what steps can the Indian mobile operators take?
Continued tomorrow.
