Ronnie05's Blog

RIL’s big disruptive push on 4G (Part II)

Posted in Industry updates by Manas Ganguly on December 5, 2012

Continued from an earlier post – RIL’s 4G push and the disruptions that could happen there-off.  The first disruption was the ability to create data hotspots with high speed WiFi through 4G Backhaul.

Disruption 2: Triple play services across voice#, data, media, education and broadcast segments

The second disruption, is in terms of triple play services – and the game really looks close to the broadcast services that I had written about some time back. To that extent, RIL would look to cut into revenue space of cable companies. In one of my earlier posts, I had mentioned about how Telco operators could up-end both cable distribution and content management and RIL seems to be planning content exclusivity along with data-pipe ownership. (Now that is something even Apple hasn’t perfected). The triple play strategy of voice, data and video could be very effective in acquiring wallet share of the customer. By exploring the television and cable space, RIL was looking to tap another potential 100 million screens for its broadband services and drive the triple play offering.

RIL as a broadcaster is geared up for media convergence and will deliver content to any new platform. RIL has been creating a walled garden for content, which will give new opportunities to VAS (value-added service) providers and open up space for new niche channels.

Disruption3: The price factor

With an eye on the larger pie, Reliance would bet on building data habit into Indian customer psyche mainstream. There are rumours about Rs.3500 tablets and data plans priced around Rs10 per gigabyte. With a mighty 4G backhaul, powered by 802.11n WiFi and data speeds upto 100mbps-1Gbps and Rs.10/GB cost of data, the traffic rates are bound to multiply. RIL is betting on this traffic surge to build its big push in Telecom.

#: Assuming that RIL will find a way to muscle in VoIP regulation for Inland calls also. RIL does have that clout to make that possible.

 

Indian Telecom Story (Part XX): Telcos caught sleeping over data based revenues

Posted in Industry updates, Revenues and Monetization, Value added services and applications by Manas Ganguly on November 3, 2009

I have been writing about the how a price war in the Indian Telecom industry would be a future in vain. I have also written about why Telcos should explore future in data and consumer centric services rather than price wars. The pay per second bloodbath was clearly inevitable. However, i cant think, why would Large Telcos in the country miss the trick. A price led strategy would never be sustainable, and yet the whole industry seems to have rushed into 1 paise per second formula. Am i missing something?

The explosion of subscribers in India has put a lot of pressure on the existing telecom infrastructure and the frequencies available. While there have been efforts like sharing of infrastructure between operators which has allowed to keep Capex under control, there are also minefields such as Mobile Number Portability which adds a lot of uncertainty relating to the subscriber adds and churn. 3G is seen as an answer to the lack of bandwidth, but the license fees demanded by the government is exorbitant and will require long periods of gestation. India has also attracted players like MTS, Telenor, Etisalat, DoCoMo adding a lot of uncertainty in the existing market conditions.

The principal source of operator revenue is voice and data. (Data services here also implies SMS and MMS services). Under the present bandwidth shortages, existing operators have only been able capitalize on the voice led growth. SMS is the only the significant other contributor to revenues in Indian telecom eco-system. The current contribution of data services to operator revenues range from 8 to 11%. This includes SMS and also includes the Tata Teleservices and Reliance CDMA connections, which are typically data heavy services. GSM’s data revenues would be much lesser than CDMA. India being a 80% GSM country, the ratio of data services to Telecom services thus lags the international numbers. World over the higher percentage of Data revenue balances the fall in ARPU.(The Data ARPUs are on the rise globally). In India, data services provide no such safety net.

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A case in point is the US telecom market which is the world’s highest consumer of telecom based data solutions. Over the last 5 years, Data ARPU has increased 7X while the Voice ARPU has reduced by 30% in the same period. A $15 dollar ARPU loss in Voice has been compensated by a $12 increase in Data ARPU. One might argue that this be the case in US which is a 3G country. But the point made in Indian context though different in regulatory and eco-system aspects, draws from this example.

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  • While voice tariffs in India is the lowest, Data tariffs in India are amongst the highest in the world. Cost being an important determinant of penetration, higher data costs have acted as barriers to data spread.
  • Application and Content Revenue sharing models sometimes make it difficult for higher levels of applications to be built because of cost/higher break even periods. Even if applications are made, the revenue sharing with Telcos in India, would make it difficult for the Apps provider to advertise or communicate the offering to consumers.
  • There is little in terms of consumer services to High ARPU consumers. Telcos in India could perhaps learn from Indian banks a few lessons in differential treatment of HNIs.
  • All this time, Telcos in India have done little to tie up with content providers such as Googles of the world. LBS, Maps, Navigation and Social Networking could have been a great apps. This is a “Blue ocean” where Telcos have not ventured yet at all.
  • The CEOs of one of the biggest Telcos in India once dismissed the MVNOs as “loss making”. Perhaps it is time to re-think strategy in terms of branded and exclusive content. (Read Report)
  • All this while, Nokia has been preparing its platforms to differentiate itself through services. Telcos were in a far better position to aggregate service bundles and yet they didnot. Did all of them miss the trick? Did they fall into the Operator Dumb Pipe syndrome trap!

 So, when it was sunny, all the Telcos in India did was to make good subscriber numbers in falling ARPUs. That was the low lying fruit. Nobody perhaps looked at the next levels, because they were rolling in money anyways. The bloodbath in terms of per second tariffs is now catching the Telcos. They still prefer to look at market shares rather than the EVAs and Bottom-lines.

Next story in making would be the inevitable shake out and age of acquisitions.

Please feel free to rate the post and put your comments (negative or positive as may be!)

Read the earlier posts here:

Indian Telecom Story (Part XIX): Tariff war and hyper competition

Indian Telecom Story (Part XVIII): Eroding profits for higher acquisitions

Indian Telecom Story (Part XV): Net Operating margins at risk!

Indian Telecom Story (Part XIV): Can pricing differentiate new Telco services?

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