Innovation will make or break Indian telcos
By : Sagar Mehta
Telcos in India and around the world are undergoing a major evolution phase with the advent of Fourth generation Long Term Evolution (4G LTE), but is also facing the brunt of dwindling numbers. This is common with almost all the communication service providers (CSP) across the country. While the specific challenges faced by an operator in a region may vary, but they have some common short-term as well as long-term challenges which they have to tackle.
Advancing Technology, Dwindling Margins
India is still a major voice market for telecom players. As per a latest report by the Telecom Regulatory Authority of India (TRAI), Indian mobile industry players still make 70 % revenue from voice calls.
High-speed data services were started in India post the 2010 auction of data-centric spectrum. With growing data requirement, data service technology has evolved from 2G to 3G and now 4G by way of LTE (Long Term Evolution) technology.
Now with 4G LTE rollout, the voice revenues of the industry may get impacted. The free voice business model uses voice over long term evolution (VoLTE)/voice over IP (VoIP) technology, which converts voice into data and transmits it as data. The model will be very successful from a customer perspective, but it will burn a deep hole in operator pockets as voice is a major revenue driver in India.
Further, with the new model offering unlimited calling and data under one plan, operators are left with nearly no cross sell opportunity. There was a time when operators had virtually 10 different legs of calling which were priced differently and accordingly there were products available in market.
Red alert; Revenues drying up thick and fast
When compared to international levels, the data revenues as proportion of total mobile service revenues in India has been significantly lower. World average per minute is 10 ¢ (Rs 6.5) & Per GB is $10 (Rs 650). As opposed to this, the per minute average in India is 60 Paisa. Even by this analogy, data should have always been Rs 60 per GB.
However, the pricing per GB has gone down by almost 70% in the last few months. Operators enjoyed a free run on data pricing for last 2 years but with competition finally coming, prices have crashed to Rs 70 – 80 per GB.
Operators used to, on an average, make 10% of revenues from IDD Calling (3%) & SMS (7%). Smart phone penetration & growing usage of OTT apps for messaging & international calling has impacted this 10% of revenues of operators. There is no visibility of that revenue coming back again in near future.
Digitalisation – Boost for the masses, but a hindrance for CSPs
India is standing at the cusp of a digital revolution, which is closely tied to the proliferation of broadband services and affordable smart mobile devices. Wi-Fi networks can facilitate internet access in rural and urban areas. As per an ASSOCHAM-Deloitte joint study, there are around 31,000 public Wi-Fi hotspots in the country, and this number is expected to increase to 202,000 by 2018.
Public Wi-Fi has been recognised as an essential component of the Digital India initiative, which aims to digitally empower the country. Under this initiative, the government aims to roll out free Wi-Fi internet connections in 2,500 towns and cities across the country with an estimated capex of Rs 70 billion. Free Wifi will result in significant data offloading by customers resulting into lower data revenues for Telecom operators.
Weathering the storm
The voice revenues getting affected is only a part of the problem. There have other underlying issues too. As per an ICRA report, India is already 3-5 years behind the developed markets in terms of roll out of data services and its penetration to a meaningful extent. To worsen the situation, the telecom firms are already reeling under debts of Rs.4 trillion (as of 31 March) and it will continue to rise with more investment needed to beef up infrastructure (including the upcoming spectrum auctions).
If the Indian telco industry has to survive the challenging times, they will have to ride over the digital wave and up their ante in digital ecosystem. With numerous disruptions happening, which are signs of a healthy and ever-growing industry, there is also a pressing need for innovation, and disruption for virtually any industry. Mobile devices and related broadband connectivity continue to be more and more embedded in the fabric of society today which offers numerous opportunities for all sectors within the telecom industry.
Deliver personalised content
Operators need to increase focus on higher value mobile content and applications to diversify revenue sources away from commoditised access services and also to improve customer retention. Digital attributes like social media sites visited, apps downloaded, content viewed can be analysed to create persona of the customers, with which they can deliver personalised experience over touch points. Operators need to understand that no single customer’s journey is identical. Hence, personalised content/offers as well as direct channels like say a self-care app are essential to deliver personalised digital experience ensuring continuous engagement, brand loyalty and profitable relationship.
Operators have rich information about their customer’s preference. They can capture events like service usage, recharges and digital transactions all in real-time.
Each subscriber is unique and personal needs, preferences, interests, spending power and contexts of usage change from one to the other and over a period of time. Revised grids and segments have to be created considering not only traditional usage legs but also with other attributes like preferred channel of recharge, device ownership, content preferences, online searches and browsing patterns, social media sentiments and contact centre history.
Considering the demographics, social circle, economic status, psychographic needs and so on, subscribers could fall into multiple persona like ‘cricket fans’, ‘jazz music lovers’, ‘international traveler’ and ‘frequent shopper’. Considering these variable attributes, the operator can automatically recommend the right offer and content fitting to subscriber’s needs thereby ensuring relevancy and personalised engagement across touch points.
Consistent product communication
Type of products communicated to customers should be consistent across channels. At the same time, subscribers interacting with operators on different touch points have different persona and ability to spend.
For example, the average ticket size of recharges is higher at apps & website as compared to retailers. In such a scenario, higher revenues can be generated from same subscribers by promoting short terms / lower value variants of the same product through push communications while promoting higher value variants on digital platforms.
Lifestyle VAS like Mobile Money
Customers need to have more than one reason to be associated with you. Mobile money gives operators that opportunity. Mobile money in lot of markets across the globe especially Kenya has been one of the biggest retention driver for operators. While Paytm has emerged to be the most preferred wallet for customers.
Every operator these days, has developed its own mobile wallet facility. However, all operators need to ensure their wallets stay relevant and are used for all the digital transactional needs of their customers.
What, where & when is the most difficult question for telecom operators when it comes to promoting right offers to customers. Indian telecom operators have been dependent on heuristic knowledge of their product managers for long.
With advance analytical models powered with machine learning techniques, man-machine collaborated decision making is going to transform the way operators can engage with customers in smaller windows of relevance. Channel Affinity, Multi SIM identification, Product prioritization, NBA are some of the models that equip operators to achieve this. With maturing analytics tools and practices – these models can even deliver up to 80% accuracy when it comes to recommending right offers and decisions.
Experience driven Loyalty Program
None of the Indian operators till date have really run full-fledged loyalty programs. With digitalisation, managing the program for operators, communications of points to subscribers and even triggering quick fulfillment actions from them has become extremely easy.
Operators could drive customers to do particular value recharges or on a particular channel by giving additional loyalty points. Program also work extremely well for post- paid customers as it could be easily linked with payment history & add on connections.
Operators these days already have partnership teams that can build a good portfolio of benefits and services with partners on which the points could be redeemed.
No one knows their customers better than their mobile operators. Its time operators leverage this opportunity by monetising this data and generate additional source of income. Major operators have already successfully leveraged their data to deliver more business value and driven their businesses forward through mobile advertising, identity management, m-commerce, and other new digital services.
As the number of embedded devices that require mobile connectivity grows, telecommunications companies need to look for prospects to increase revenue through their core businesses as well as through such new products and services that are enabled by these core businesses.
The technological convergence redefines business models across the telecom industry. The market space for traditional products and services is getting crowded faster, and prospects for profits and growth are reduced as products quickly become commodities.
The telcos need to embrace new strategies while focusing on enhancing the effectiveness of processes and innovative business, to stay afloat. Such approaches can reduce costs, advance the quality of service, and offer more attractive packages to the customer. Irrespective of the success and financial fortunes of the individual players, the market situation for products and solutions in the telecoms sector still points to a number of viable opportunities.
This article was originally published in
This article was originally published in Telecomlead