Telecom: What Should Telcos Do?

The spectrum auctions conducted in March 2015 have netted the government a cool Rs 1.1 lakh crores. The operators are required to pay 25-33% of the bid amount – based on the spectrum frequency - immediately & post a 2 year moratorium, pay the remaining amount in 10 equal instalments. The Top 3 operators - Airtel, Vodafone & Idea – account for 78%, while the Top 4 bidders- including Reliance Jio – account for 87% of the bid amounts. Critics have, therefore, argued that going forward, only operators with deep pockets can sustain in the auction game while weaker operators would be forced to either exit, work in shrunk geographies or attempt niche play. Perhaps, this shall help industry consolidation into a 6 player market.

Govt. intervention through notification of spectrum trade & sale rules could accelerate consolidation; else weak operators with strained balance sheets & their bankers would be forced to take a bloody haircut. Some of the critics are alarmed that while the bid largesse shall help the govt. balance its fiscal deficit, it shall have the unintended effect of upping call rates. Ravi Shankar Prasad, the Telecom Minister has scoffed at such a possibility & explained that a modest price rise of 1.3 PPM (Paisa Per Minute) could be affected while Rahul Khuller, the head of the Telecom regulator, TRAI, has pegged the fig. at a more reasonable 6 - 7PPM. Surely, both admit the inevitability of a price rise unless telcos find goldmines in other revenue streams.

Telecom firms have Technology playing a transformative role, silently threatening annihilation of existing business models. 
See http://meetrk.blogspot.in/2015/01/telecom-disruptors.html. 

The saving grace however is that disruptions inevitably help consumers & should incumbent operators transmute these disruptive forces into opportunities through effective strategies they could strengthen their pole positions. For some suggested “blue Ocean strategies see http://meetrk.blogspot.in/p/telecom-what-next.html). 

The following list is a further addition to the same.

Grow Voice Rate: The Generic Strategy

Telcos are joyously riding the wave of increasing data penetration & thereby data revenues while experiencing concerns on the voice side. They have tried to grow voice revenues by either reducing free minutes or increasing basic rate. Most of the operators today have a base rate of 1.7 PPS (Paisa Per Second). Incorporating the 6 - 7 PPM increase - which TRAI deems reasonable - shall increase the base rate to 1.8 PPS (Rs 1.08 per minute).  A basic rate of 2 paisa per second (Rs 1.20 per minute) within the next 6-8 quarters is a reality; incidentally, in 2009, before the launch of new operators, the basic rate was Rs 1/- per minute which combined with granularity ensured a realization of Rs 1.15-1.20/- per minute Thus 2PPS shall only bring prices back to the 2009 levels. Operators’ realizations would however be much lower due to the presence of discounted tariffs through STV (Special Tariff Vouchers).

Weaker players would continue to play the “price warrior” game & in such a quest have depleted their STV revenues. The Top 3 should, therefore, continue to offer aggressive STVs to ring-fence Hi- Value consumers & offer discounted tariffs to customers showing a propensity to churn, identified through “churn prediction” analytical models.

Invest in multichannel enablers:

Tech companies like Apple, Google, Microsoft etc. have used “retail” as a strategy to enhance “sensorial experience”, “demonstrate tech products”, as well as increase sales. 12% of apple’s sales in 2013 came from 415 stores in 14 countries. Customers “research online & buy offline” (ROPO) where the retail salesman plays the most important role to disseminate technical information & arrange for sale closure. Likewise customers could “research offline - in a store & purchase online” (ROPO) - to gain the benefits of lower prices. Operators should therefore create a rebound between offline & online by leveraging tech enablers like QR codes, NFC (Near Field Communication), BLE (Bluetooth Low Energy) & interactive kiosks. Operators should therefore strengthen their understanding of the device ecosystem. These stores would serve as fulfilment centres when IOT (internet of Things) takes off.

Launch segment specific products:

Kids: With 65% of Indians under 35 & fertility under 2.5 we are on the cusp of a baby boomer generation. Recent incidents of sexual assaults in Schools of Bangalore, clearly portends the need of “kids security products”. Operators abroad are ahead on the learning curve as they have already launched products for this segment.

AT&T‘s FiLIP is a wristwatch with GPS, Wi-Fi, and cellular technology designed to keep kids and parents connected  It is a voice watch - designed for kids aged 5 – 11years -  which parents can easily program with 5 contacts to communicate with the device. An emergency button triggers an automatic location beacon, ambient sound and call recording, and automatically calls the contacts established in the Mobile App. It also sends a push notification to the primary account holder. Currently it cannot call 911 emergency services. It is water resistant, controlled by an iOS/Android smartphone app that enables parents to call their kids, set Safe Zones, and communicate with kids via text message

Products for the Blind: India has a 15 million blind population who could be supported through tech innovations.

Verizon  has a product that integrates recognition & voice access tech. to market life-enhancing tools that provide accessibility and higher levels of independence to the blind and visually impaired customers like navigating an unfamiliar room, matching clothing or reading a menu at a restaurant. Velasense - a mobile application suite that uses the Verizon 4G LTE network and smartphones with advanced cameras and sensors - delivers real-time feedback to users about people, objects and surroundings, including text, colours, currency, barcodes, and familiar faces. Useful information can also be stored in the Verizon Cloud for playback on command. This will help the blind find new ways of engaging with others, and can enable greater access to education, employment opportunities and life-changing independence. The next generation of solutions may include a hands-free, audio-controlled headset that can operate like a "seeing digital assistant."

Surely products such as these cannot be afforded by all. But if the launch of LTE by operators is combined with the govt. investments on “Digital India” along with the CSR contributions currently mandatory under the company’s act, the blind can achieve true “freedom”.

Conclusion

Controversies need not be inevitable in a telcos’ quest for finding new revenue streams. Airtel, however, invited one - of violating “net neutrality” - when it launched “Airtel Zero”. The company has slammed such accusations with the following rejoinder by their CMO Srini Gopalan http://www.teleanalysis.com/resources/column/airtel-zero-is-similar-to-toll-free-services-srini-gopalan-14338.html. While the discussion paper on “net neutrality” is out & TRAI is trying for an early closure, it is certain that any attempts to reverse the growing international popularity of “net neutrality” is unlikely to succeed, especially when the principle has gained political & regulatory support both in the EU & the US.  Companies could, therefore, continuously replicate innovations being tried & tested by their counterparts abroad for “quick wins” on revenue enhancement while working ceaselessly on consumer insights to drive their own innovations. In the enduring telecom battleground, customer acquisitions shall be the focus in Category – C circles while the data revolution & the innovation opportunities that it spawns shall be the focus across all circles. Needless to say, the game has just begun.