The Indian telecom industry has passed through several turbulent phases & emerged stronger. While mobile telecom services were rolled out in 1995, the high bids thereon made the business plans unviable which necessitated government intervention. The new telecom policy (NTP), in 1999, brought about a seamless transition from a fixed license fee regime to a revenue share one. The NPT also allowed for the entry of an additional operator & drop in peak tariffs which helped all stakeholders: the industry; the government; & the consumer. The operators were relieved of huge upfront payments, the government gained through an ever expanding revenue share pie and higher service tax revenues while the customer gained through price drops courtesy enhanced competition.
The industry was well served by an understanding regulator & enterprising operators. The foresight of the regulator regarding the policy prescription of calling party pays (CPP) in 2003-as per which a customer paid only for outgoing calls unlike the case earlier when he had to pay for both incoming & outgoing - gave a positive spiral to the industry. Likewise, launch of “lifetime validity” in 2005-06 by the operators expanded the industry exponentially. Today, commendably, about 93 crore of the 125 crore Indian citizens have mobile connectivity which has aided commerce, democratized information & going forward shall be the major vector driving “Digital India”
Such astounding growth would not have been a reality but for enterprising operators driving innovations Bharti Airtel, initiated an Indian innovation: the “Minutes factory” model -wherein fixed costs were converted to variable costs (capex to opex) through outsourcing of IT, call centres & network operations. Outsourcing of non-core operations to specialists led to increased economies of scale & savings thereof which were passed on to the customers through reduced prices that drove minute elasticity creating a self-fulfilling virtuous cycle. International innovations were welcomed & integrated into business models. MTN, South Africa, in a bid to optimize network utilization is credited to have launched the “dynamic discounting model”-dropping tariffs, cell site wise, based on location & time of the day & intimated to the customers through cell broadcasts- which got replicated, in India, by Uninor. Econet, Zimbabwe pioneered a “location based management” system-which involved geo tagging of customers, cell site wise which was of immense help in concluding decisions regarding profitability; this was replicated in India by Bharti. Zain, Africa, was the first to launch a “one network plan”-that helped customers to make calls at local rates across 12 countries; this got replicated in India as the “One India plan” by all operators. Remittance models launched by SMART Philippines & Vodafone Kenya (M-Pesa) are currently under replication. Going forward, telcos, if interested, could emerge as large “Payment banks” thereby entering into the banking domain. That, is only phase 1 of the transformational exercise currently underway.
Operators continuously seek new avenues for revenue enhancement not only to satisfy their shareholders but also to pay off for the spectrum auctions. Airtel made one such attempt to tamper with “net neutrality” by charging extra for VOIP (Voice over Internet protocol) which received a rebuff recently. Clearly, preferential treatments or differential treatments to OTT (over the top) players or other content players, by any operator would be under severe regulatory scrutiny henceforth, thereby ruling out such revenue enhancement plays.
That begs the question: what next?
ICE convergence & Quad Core Play:
ICE - Information Technology, Communications & entertainment convergence is now a reality. Recently the Argentina government has allowed for a single licence for operating ISPs (Internet service providers), tele-communications & television stations. In UK, key operators are displaying an intent for active quad core - Mobile, landline, broadband & TV- play. British telecom (BT) which started a TV channel “BT Sports” in 2012 is now attempting an acquisition of the mobile business of EE, the 2nd largest operator in UK. Incidentally, BT, had divested its mobile business, in 2001, to Telephonica, Spain (currently running as band O2 in UK) & was operating its landline & broadband businesses alone. The importance of content can be understood from the fact that BT Sports bid aggressively & won exclusive rights over the EPL (English premier league) which it intends to bundle with the other services on offer. Vodafone - a major mobile player - & SKY - a major media player - are therefore planning interesting counters. In USA we have already seen AT&T DirecTV & Verizon Comcast tie ups. Similar reactions by operators in India therefore would not be surprising. Reliance jio has already sounded the bugle by taking over Network 18 which already owns Eenadu channels & web properties.
Crowdsourcing:
Telcos should work on crowdsourcing ideas internally, funded in a start-up format, marketed aggressively & revenues shared with the innovators. AT&T has already fine-tuned such a model with great success. This initiative should be supplemented by “appathons” in colleges & schools not only to create a youth connect but also to strengthen the app ecosystem thereby creating greater customer stickiness & an additional revenue stream. Such a change in mindset at telecom firms needs infusion of talent from IT product companies which is an HR challenge.
Strengthen Enterprise Service Play:
Telcos should move beyond their legacy enterprise play by offering data centres & data security services. They should encourage enterprises on vendor consolidation & shift their requirements to the cloud. Offerings such as software as a service (SaaS) would provide a new edge to their SME ( Small & Medium enterprises) drive. Since telcos already have data analytics specialists, especially in the marketing domain, they are well advised to hive off the vertical & offer “Big Data & Analytics” services Valuations commanded by companies such as Mu Sigma indicate that such a strategy shall be a winner.
Mobile Advertising:
Telcos have captive information on mobile users which could be utilized for offering personalized mobile advertising services. Advertisers suffering the ill effects of clutter would be more than keen to play along.
All this & more, has the potential of bringing telcos in direct confrontation with IT firms who are strengthening their offerings in SMAC (social, mobile, analytics, cloud ) domains. The entertainment play shall bring them in direct conflict with media companies. Therefore, ICE convergence offers a plethora of options to telcos & each of them has the freedom to pursue its own blue ocean strategy
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