Wednesday, March 2, 2011

Dependency Increasing of Operators on VAS

By 2015, prepaid subscribers will make up 98% of Indian mobile phone users, making it harder for mobile operators, especially new players, to survive only on revenue from voice calls.
According to research group Ovum, from about 750 million now, the number of Indian mobile subscribers will grow to 1.3 billion by 2015 and nearly 98% of them would be prepaid customers — up from about 90% now.
“With mobile penetration in India above 60%, the majority of the next 500 million connections are likely to be low-value subscribers,” said Shiv Putcha, principal analyst (emerging markets) at Ovum.
Mobile penetration in the country’s major urban centres has already exceeded 100%, suggesting more than one mobile connection per person.
The dominance of prepaid customers in a market translates to lower average revenue per subscriber, lower minutes of usage and high customer churn between operators.
Such market dynamics call for telecom operators to be “focused on driving greater adoption of data and value added services (VAS),” said Ovum.
Tariffs have already reached such rock-bottom levels that incremental pricing innovation efforts are unlikely to pay off. “Any further tariff reductions will only have a minimal impact in the marketplace. New operators will have to go beyond voice tariffs and tap on improvisation in other areas like network quality, billing efficiency, and their portfolio of VAS to attract customers,” Putcha said.
“Operators need to realise that convincing low-income subscribers (from rural areas) to pay for complex services is a gradual process,” he said.
Timing will be a critical factor when it comes to introducing new VAS. Investing in introducing many new service offerings willforce operators to charge high amountsto ensure adequate returns on their investments, but pre-paid customers typically take longer to accept new offerings.
“The pace of product development is especially critical considering that prepaid subscribers generally prefer to wait to see the benefits of a service before adopting it,” Putcha said.
“New entrants have pulled down the tariff levels to new lows and to be able to run a profitable operation they must have high usage volume to compensate for lower call rates,” said Mritunjay Kapur, managing director at the Indian arm of advisory Protiviti Inc. “Failing that, they need more innovations on the VAS front, especially those that are relevant to rural subscribers.” source

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