Indian Teleco's ready to woo rural customers

In line with a slew of steps taken by other service providers, Bharti Airtel has lowered the bar on lifetime prepaid to Rs 495. A similar move enabled RCOM to set what it claimed was a global record by selling over a million handsets in under a week. A day after RCOM’s move, the world’s leading handset maker Nokia chose India for its global launch of seven entry-level handsets. At the same time, the newly-merged Nokia-Siemens Networks lauched its ‘village soultion’ which lowers the capex for service providers by 50% in order to tap rural markets. This concept will see village entrepreneurs sign up as franchisees, while Nokia-Siemens will provide them with the requisite equipment to provide GSM services within a 4-5 km (2.5-3 mile) range to rural residents for as little as $3 a month. Cellular operators will link their own network to the ‘village solution’ networks on a revenue-sharing basis.

The rural plans of Indian private operators
Recently, Bharti Airtel has said the company would invest up to $3.5 billion in fiscal ‘07-08, the bulk of which would be spent on rural India. Similarily, RCOM plans to invest $2.5 billion this year to connect every town and village with a population of over 5,000. Vodafone plans to launch ultra low-cost handsets in India soon.

What's the big deal in life time plans ?
A six-month long study carried out by Trai, after the introduction of lifetime pre-paid services last year, has shown that at least 72% of subscribers opting for this scheme recharge their phones every month, instead of merely receiving incoming calls as commonly perceived. The average monthly revenue per user (ARPU) for lifetime pre-paid users across the country is Rs 218 compared with Rs 261 for normal prepaid users. Pre-paid (lifetime and normal) subscribers constitute over 80% of India’s cellular base of over 165 million. It does not stop there — the Trai study also notes that these are high users of value added services. “This implies that from revenue proportion, lifetime schemes are no different from the general tariff plans offered by mobile operators in the market,” observed Trai after studying the data.
For cellular operators, telephony usage by subscribers under this scheme is more lucrative as the tariff charges here are higher than those for normal prepaid customers. This implies, if a customer on a lifetime scheme uses his mobile for a minute, his operator gets Re.0.80, when compared to Re. 0.77 for a normal subscriber. Trai on the success of lifetime validity schemes over six months revealed that 16% of the country’s mobile base had opted for such schemes. Off these, only 51% were new users, while the rest had migrated from their exisiting schemes. Besides, 28% of the total additions during this period was on account of lifetime validity schemes. “The revenue composition of lifetime tariff schemes shows that a large proportion of revenue is contributed by outgoing calls and other services. This implies that from the revenue proportion, lifetime schemes are no different from the general tariff plans offered by mobile operators,” Trai said. The big picture emerging from the analysis based on empirical data is that the scheme has been very popular. Along with halving the entry price, operators have also come introduced Rs 25 top-up vouchers. The Rs 25 vouchers bring down call charges in the lifetime schemes to normal ratesAn analysis by telecom regulator

Bharti's strategy
Bharti Airtel, has lowered the bar on lifetime prepaid to Rs 495 in a move that could change the dynamics of the telecom sector. So far, lifetime pre-paid services have been available for Rs 999 (or at equal monthly instalments of Rs 99 for 12 months) and halving of the charges is expected to expand the market by making mobile services more affordable. In practice, ‘lifetime’ validity allows users to receive incoming calls for the duration of a company’s licence, which is for 15 years. It gives subscribers the flexibility to choose any plan for outgoing calls. Recent history shows that other operators are likely to follow suit soon with attractive lifetime offers. Bharti’s move is in line with a slew of steps by handset manufacturers, service providers and network majors over the last two weeks to lower the entry barrier and tap into the country’s massive low income market.

The catch with Bharti’s new offer launched on Thursday is that subscriber will have to use ‘‘a minimum of Rs 200 every 180 days to continue enjoying lifetime validity benefits.’‘ The existing Airtel Easy Lifetime prepaid subscribers (Rs 999 offer) can also avail this scheme by recharging with Rs 495. The tariff rate will be Rs 1.99 for a local call and Rs 2.99 for other calls in India. Tariff rates for local calls under the non-lifetime schemes is as low as up to 40 paise for local call.

Tata Teleservices, which pioneered lifetime pre-paid services in October 2005, saw rapid increase in subscriber base at a time when it was struggling for stability in the fast-growing sector. Soon, other operators including Bharti and Reliance Communications (RCOM) also launched such services.

1 comment:

Lin-Zhuang Khoo said...

Hi Sanjeev,

I want to say what a great blog you have! It's been invaluable to me doing research in the rural development of India's telecom industry. I work for the world's largest renewable energy company and would like to speak with you if possible to for more information about the telecom industry in India. Would that be possible? Do email me at
Thank you

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