This article is having in depth analysis of Indian market. But i do’t understand how would incumbent operators will response to tariff war started with per second billing. I have read somewhere that a call cost 40 paise to Reliance and they are offering 50 paise per minute for local,std and even roaming. How could operators will be able to sustain EBDITA of 40% . Moreover 3G auction is supposed to be held in near future; for which base price is Rs. 3500 Crores. I think in future we will see lots of happening coming in Telecom Industry of India.

As someone pointed out. VAS is going to play a bigger role in the coming years.

Some creative idea to reward loyalty in the era of MNP. Give additional 1% discount every month to both post and pre paid customer with a max cap of 10 to 15%. This will ensure higher loyalty as they loose on discount reducing churn rates. Your views???

rgds // Sourav

Rgrds,
Jagadish

Reducing ARPU and price wars cannot continue for long. The only way out is VAS which is in a boom. Complete advertising campaigns are being designed through this channel and complete infrastructure is being supported by MVAS companies. Rural market penetration is a slow process and even new subscriptions at a 20-30% growth will not add much to the bottom line looking at so many players. New models of revenue are the only way out.

How? : All Indian operators are big time in Site sharing, specially Bharti-Vodafone-Idea thru Indus towers (with more than 95k towers as on Mar09), they pay infrastructure rentals to Indus towers, This payment is treated as Opex and reduces EBITDA, but revenue generation thru this business is taken as other Income (Below EBIT line) as revenue flows are Dividend from Industowers. This is right accounting practice but this practice reduces EBITDA by around 1.5%-2%.

I worked with Bharti and Hutch in India, Since beginning indian operators are concentrating big time on costs, they never allowed costs to go out of hand, you have mentioned few of the examples, but the reality is any operator can manage this kind of margin if they honestly try to keep costs low.

regards,

Mario

While I agree with the factors listed out by you that have helped to reduce the tariff rates to the lowest possible in the world thereby mutually benefitting the customer as well as the operators themselves. But I still feel there is great scope to further reduce the rates which I expect one of the operators in India to initiate as has been done with “Nano” that will change the dynamics in the Telecom Industry globally. Thrust of the tariff reduction is yet to come in India is what I foresee when sharing and outsourcing will have really settled in (imagine when Tower sharing is raised from 1.5 to 3.0) the benefits that can be passed on to customers and the corresponding growth that has been rightly depicted in the graph.

Innnovation will really kick in once the new players roll out the services, and that will be the impetus for the players to take the learnings to other shores and maintain EBIDTA of 40%.

regards

vijay

Do you know how the prepaid revenue is accrued in the operators books. Since 99% is prepaid – this could be significant – 70 – 80% of their total revenue. Do they book it on sales, or they actually book it on usage.

Ankur

I tend to agree with you on the issue of customer retention in prepaid also. I think operators need to have a mindset change and start looking at the total customer lifetime value instead of just subscriber acquisition.

It is going to be more critical as the new subs are coming from rural and low income urban segments with low ARPUs.

Unfortunately, analysts till recently have been only talking about net adds. This is changing now with focus on profitability and we should see more activities on retaining customer base from the operators.

Regards
SVN Arvind