Bharti Airtel Tariff Plan - Open Challenge to Reliance Jio

The buzz is everywhere in the Telecom sector that Reliance Jio will be coming out with very aggressive tariff which will be bundled with cheaper device from LYF as well as device from their panel. Reliance Jio intention is to focus on the data revenue through series of data centric applications or games or services whereas offering subsidised voice or free voice.

Even Bharti Airtel Chairman Mr.Sunil Mittal also admitted that Reliance Jio entry will change the tariff dynamics of Indian mobility segment and it will take an year to settle down the dust. The impending price war will also force some of the running Telco to go for merge or will be acquired by big fish.

In the meantime, In order to create non breakable wall to protect their high APRU user Bharti Airtel came out with myPlan  Infinity. In the two plan segment, Under 1199 plan user will get free voice call , few free SMS and 1GB of 3G/4G data free along with Wink movie and music whereas under 1599; the data pack offering is increased to 5GB.

I call the proposition a master proposition as Bharti Airtel is well aware that average data consumption per user per month stands at 0.9GB and at the same time, they will promote their in-house product  which will trigger user to use higher data at the same time reduce the Bharti Airtel user acquisition price for those product by INR 50 .Bharti Airtel is also well aware that the average ARPU per user is around $3.2 on a consolidated basis but when it comes to postpaid it comes up around $10. In new plan they will increase the ARPU by $7. On  contrary, in 1599 plan, Bharti Airtel is trying to attract very heavy data user and am sure that they will be putting the new plan attached user under priority based queuing access mechanism to ensure the best QoS ( Quality of Service).

The proposed plan will also attract many prepaid users who will be willing to convert into post paid given the fixed rate as it include all the options of calling including roaming. At the same time,  In my point of view many users from other network who is not happy with their service providers will opt of Mobile Number Portability and switch over to Bharti Airtel

It will be interesting to see Reliance Jio marketing strategist movement to super counter Bharti Airtel classic move. I also believe the further delay by Reliance Jio will put Reliance Jio in difficult position to lure away high APRU userbase from competitor.

Bharti Airtel CEO Concern Around Data Adoption - Learning for All

Bharti Airtel came out with satisfactory Q1 FY17 result with growth in all segments. Bharti achieved improved from EBITA level and also managed to reduce their debt level while generating healthy cash flow generation. Most of the analyst was concerned about the fall in voice usages as well as impact on data usage path. On a contrary, the result indicated that Data User base increase marginally whereas the Data APRU is in and around $2.9; same as last quarter. 

The concern area is exponential growth in their data consumption which is stagnated around 1GB per active user. With around 59 Mn Data users, Bharti Airtel is again Number one in the segment. The per user data consumption clearly indicate that Indian user appetite level and it may increase to 2 GB down the line once the price deduction implemented by Bharti Airtel. The recent interview by Bharti Airtel CEO Mr. Gopal Vittal that device price point acts showstopper but we all need to understand that we should not go by the number of mobile connection but should focus on literacy rate of India. As of today, India is having around 310 Mn data user and at max it can go to 450 even if device price go down to 1000 INR. 

According to one article published in Moneycontrol.com that around 133.3 Mn citizen income is less than 5000 INR per month and in that scenario, we must discard those userbase as potential data user. At the same Mobile penetration in rural sector is around 41% and that comes around 500 Mn wherein those user are only interested to receive call and generally uses missed call to inform the other side to call them back. Even though you capture15% of such user then out of 633 Mn TAM, the SAM will be around 100 Mn and there any operator will face the issue of payment recovery. The cost of laying down the network vs. cost recovered is near to zero and we should learn from BSNL situation. Based on the above calculation we are left with 700 Mn connection available in Rural and sub rural segment and dominant connection comes from Metro. The Tele-density of Urban area is around 150% and that reduce the TAM of 700 Mn to 500 Mn. Basis the calculation we have TAM of 600 Mn and we already captured 50% of the same as active userbase. If we deduct 70Mn -80Mn userbase who is using double connection then we are left with 520 Mn user base which left us with around 210 Mn additional user to be grabbed.

The analysis clearly indicates that we all are over optimistic about the growth of data user and data usage in India. We should also be very cautious about the potential of growing APRU and it will only go down the line post Reliance Jio launch. Bharti Airtel cleverly placed its alternative data product in the market place which in-turn started generating revenue and will continue to grow but other service providers needs to give serious thought about the path to 4G. It will be interesting how Reliance jio will play out in terms of pricing and positioning of their services through subsidy and how far they can sustain subsidy

Reliance Jio 4G User Acquisition Plan May go Wayward - Risk vs. Reward May Pinch in long Term

Reliance Jio turned very aggressive in their plan to launch impending 4G network. Loaded with fund which they generated through Bond offering also offered them lots of confidence that investors are positive about their plan.

In their quest of controlling end to end user base, they aggressively launched their branded LYF device and offering device bundled 4G data plan. Interesting step from their side but seems they missed to learn their misstep which happened during their Reliance Communication initial days when they offered bundled voice to end user to buy out the user an in 2012 -2013, Reliance communications voluntarily disconnected more than 20 million from their network and created a perception of one of the network with lowest ARPU

Recently, post facing the problem in pushing their low end LYF device with higher price range, Reliance Jio slashed the device price by 25% but attached two riders with device such as 2 year warranty and 3 months of free 4G. In my point of view and understanding around the segment; Reliance Jio is repeating the mistake again.

The target segment of the device is the entry level Smartphone user who is willing the experience of Smartphone. In that category of user segment the average balance never cross INR 100 and most are on prepaid model. Even though Reliance Jio offer 4G free for first three months, I dont see the repeat subscription of more than 5 to 7% from that category and APRU will not even $1.

 I wish Reliance Jio and LYF team for grand success in their strategy while I keep my finger crossed.

Worldwide Telecom Regulatory Body Should Consider Charging Spectrum Fee Linked With User ARPU

We all are aware that Spectrum is one of the most precious assets of any country and regulatory body faces uphill task to manage the balance within different segment of Industry and most importantly defence sector.

We are also well aware that the auction of 3G spectrum in Europe triggered Telecom initiated global recession in 2001 to 2004 wherein many Telecom service providers put in multibillion $ bet in auction with a view that data centric products and services will fly off without any problem. Unfortunately, the limitation of 3G supported devices, concern around device battery, and lack of coverage delayed the maturity time from 5 years to 10 years. On a contrary, Japan, South Korea, USA, and China succeeded in adopting it and user responded back with higher adoption.

Given the successful adoption of Technology and growth, many countries only adopt the procedure without digging down deep to understand geo political condition. None of the Telecom Networks run by any service providers cannot be successful without the maturity of ecosystem which is combination of services, platform and Applications as it is the building blocks of Telecom service provider revenue stream other than voice services.

For Example, China government control Telecom services through three entities and ensure that Telecom service providers are supported in all way. That is one of the reason that the implementation of home grown 3G and 4G standard being adopted by even global equipment supplier to ensure that they capture most lucrative market.

If we look at the APRU both on Voice and Data, I want to keep it to abstract level and want to mention Japan, USA, South Korea, China, Germany, Switzerland, UK as some of the countries where ARPU is generating high APRU on both voice and data front. One of the major reason of the same is the voice an data package bundled with device which help user to shell out minimum to acquire data centric service. While package gets over and user device gets unlocked by the Telecom service provider; user understand the true value of offered services and subscription success rate achieve higher percentage.

On a contrary, Developing and nascent stage countries trying to connect their citizen with telecom services identified it as an opportunity to raise funds for the government without analyzing the cascading impact on overall economy. India is one of the unique examples of the same. With every auction of spectrum, the regulatory body raised the base price per Mz and focused on the number of user instead of APRU generated by each user. It shocking to know that even African countries where Airtel is offering their service generating higher ARPU than India both on the voice and data side. In that scenario why we call African countries poor countries.  I failed to understand the higher base price for the spectrum. If regulatory body is so confident about the Telecom growth then I challenge Indian regulators to put their skin in the game and offer free spectrum to Telecom service provider and be a partner of all Telecom service provider. In my point of view, the developed countries based regulators should consider giving free spectrum and they should take the path of revenue share to ensure recurring revenue for the government.

In the current form of Government policy of auctioning spectrum plus charging hefty direct and indirect taxes on the Telecom service provider which is landing Telecom service provider into debt and it's not far away that they will crumble into another segment with higher NPA. Most interesting post auctioning the spectrum regulators should not interfere the voice and data pricing as it is contracting to their statement that spectrum auction is on the basis of market discovery.

In my point of view, Regulator should recommend the Government of different demographics to be part of the ecosystem and enjoy the growth as well as they should burn their fingers if losses popup. It will release higher free cash flow for the Telecom service provider which in turn will get circulated within ecosystem and will have huge driver for the continuous growth irrespective minor hurdles

Reader’s feedback will be highly appreciable.

IBM And AT&T Collaboration On Security – Learning For Indian Service Providers

Technology giant IBM and wireless communication trend setter AT&T announced strategic collaboration in Security domain which covers single point of network security and subsequent threat management. Being the number one wireless operator and experiencing the explosive data growth, the collaboration of AT&T offer single take away that there are security threats and hackers’ dynamics are changing from WEB to WAP. The adoption and empowerment of BYOD (Bring your Own Devices) and Bring Your Own Network (BYON) offer next wave of user adoption and subsequent monetization. The potential Managed security service offering which will have infrastructure and tools to mitigate network, applications, environment initiated threat towards consumer and prosumer information. The collaboration would enable customers to buy license and not to worry about security but to get the clean connectivity across geographies against possible connectivity medium.

Indian Service Providers must catch the hidden potential around managed security segment targeting especially to millions of SMB’s and SME’s. It would help them to increase their consumer retention as well as ARPU. Tata Communications launched Managed Security Services in 2008-2009 and was quite successful in convincing Indian Customer base including Service Providers. The problem with Indian Consumer and Prosumers base is that they are negligent about the importance of security and raises little to no noise in case of any information loss due to hacking or other security related lapses.

The collaboration can be considered as confirmed business case and should be replicated to garner best business opportunity whereas consumer and prosumer would get benefited in a cascaded manner. The proposed collaboration is nothing but the recognition to security issues more openly by Mobile operators and also their effort to protect their user base.

Bharti Airtel Excellent Move – Bonanza for Post Paid Subscribers

Telecom Industry players post experiencing major headwinds started showing some sign of stability. In the last two years coins turns in favour of incumbent telecom operator and challengers as well as regional players are struggling to hold on to their explosive growth. Bharti Airtel seems taking the charge given their end to end telecom service offering including high speed data offering through 4G network. Bharti Airtel came out with unique tariff plan exchange for post paid subscribers. The move is going to give Bharti Airtel edge over competitor as well as opportunity to convert high APRU oriented Post Paid subscriber. Interestingly, Bharti Airtel identified the pain of subscriber of getting confused in choosing tariff plan from ‘000s available one as well as to manage multiple different plans for different kind of telecom services. Indian Telecom Service providers total ARPM or ARPU from VAS or ARPU from data is low compared to peers in developing countries. One of the major reasons of the same is freebies attached with pre-paid plan and MNP (Mobile Number Portability). Many pre-paid subscribers use Mobile Number Portability as mechanism to keep on taking freebies. The launched tariff exchange offer post-paid subscriber flexibility to allocate their chosen plan for voice, data, and value added service. It also offer subscriber to opt for remodelling of their plan once in a month. It would reduce Bharti Airtel resources in handling billing issue and would offer better revenue recognition capabilities. The predictive nature of plan would also help Bharti Airtel to add scalability for their successful VAS or data service by using dynamic resource allocation management. In my point of view, the launched plan is going to attract many subscribers and may fulfil Bharti Airtel goal of more post-paid user to increase ARPU across quad play services.