Telecom penetration is only 60. 99% in India which implies that there is huge potential for growth in the country where there is a large youth population. But Average revenue per user (ARPU) is decreasing rapidly ($ 4. 5) because of the price wars (rate per minute approximately $ 0. 01 ) in telecom industry. With new SIM cards being sold at take away prices the switching cost for the prepaid users is negligible as they can switch to any telecom service provider which gives the best prepaid deals. So it has become a buyers’ market which is decreasing the profit margins for all the telecom service providers.
The first people to buy cellular telecom connections in India were corporate users. Slowly, the user base spilled over to personal users as the price point got lowered every month. Now the individual user wants more and he will get more. VAS and innovative tariff plans are two critical elements which provide an enhanced customer experience and value for money to the customers. ( http://economictimes. indiatimes. com/features/financial-times/The-telecom-triangle-Subscribers-price-VAS/articleshow/6801561. cms) Value added services (VAS) generate only 12. % of the wireless market revenues but it is tipped to be the fastest growing market in the world. More usage of VAS can increase APRU so main focus of telecom providers is VAS in urban markets. Airtel continuously consolidating its market leadership position despite intense competition.
It has the largest private operator having presence in the voice, broadband, IPTV and data in India. Various VAS are shown in Appendix A. Growth strategies for Airtel are shown in Appendix B. It mainly focuses on increasing ARPU and reducing costs which s applicable to all the Indian telecom providers. (Source: Investor Report – Bharti Airtel Nov 2010) Telecom providers have started sharing telecom infrastructure to reduce their network deployment costs. Infrastructure sharing also offers advantages like improved service quality, increased affordability for customers, faster roll out of services in rural and remote services, significant reduction of initial setup costs, increased environmental aesthetics and lower operating costs for service providers. (Source : Indian Brand Equity Foundation – Report on Indian Telecom Sector).
Two technologies that have been changing the landscape of Indian Telecom industry are WiMAX and 3G. WiMAX has been one of the most significant developments in wireless communication in the recent past. Since this mode of communication provides network access in inaccessible locations at a speed of more than 4 Mbps, it is expected to be a major factor in driving telecom services in India, especially wireless services. Thus, it will lead to the increased use of telecom services, Internet, value-added services and enterprise services.
WiMAX is expected to accelerate economic growth and assist in providing better education, healthcare and entertainment services. It is estimated that India will have 13 million WiMAX subscribers by 2012. (Source : Indian Brand Equity Foundation – Report on Indian Telecom Sector) 3G is emerging as an accepted technology platform across geographies as it can deliver high speed data and voice on a single network. The research identifies that 3G, if used as a data card/modem, will give impetus to the broadband penetration in the country.
One of the reasons for low growth in the Indian broadband market is the challenge of providing high bandwidth connectivity using landlines, especially in remote areas. The growth in the number of 3G mobile subscribers will largely depend on the strategies adopted by successful 3G operators to attract mobile subscribers characterized as price-sensitive. As handsets is becoming an integral part of the consumer experience, the availability of a large number of feature-rich handsets at affordable prices or in attractive bundled offers s likely to further drive the adoption of 3G value-added services. The number of people in India using 3G services is supposed to rise 80% by 2013( http://indiatelecomnews. com/? p=919) A recent development in this space is the launch of Mobile Number Portability (MNP). This would led to decreasing ARPU coming from post-paid users. Various telecom providers are currently trying to figure out the strategy for the same. Mobile number portability (MNP) enables mobile telephone users to retain their mobile telephone numbers when changing from one mobile network operator to another.