Contrary to general consensus, the recent unprecedented 40 % tariff hike by Telcos is actually good news for Indians using mobiles as a productivity tool – More about that but later.
Peter Thiel in his book “Zero to One” cautions disruptive companies often pick fights they can’t win.
Chunnu, our odd jobs guy has been unreachable lately. His voice prompt says “Incoming call is not available on this number . It will be resumed post recharge”.
Chunnu represents tens of millions of subscribers who will take what you give them as long as its free.
| Subscriber Base in Millions as of May ’19 as per (VLR): | ||
| Service Provider | Gross | Active |
| Airtel | 320 | 320 |
| Voda-Idea | 388 | 337 |
| Jio | 323 | 272 |
| (Source – Motilal Oswal Sector update report dated 19th July 2019) |
The data suggests that if you give an ox cart rider a swanky car, he will play with it till it runs out of free fuel or will use it sparingly – more so if fuel prices jack up. Technology, for most , is just a commodity.
The gloves off battles over the past 3 years has siphoned off $ 6.41 B or INR 46000 Crs. of Adjusted Gross Revenues (AGR) from Telcos. Revenues from AGR being the biggest bread winner for the government is not very pleasant news for the tax payer.
S N A F U
Taking Thiel’s conjecture a step further, the impact of the carnage extends way beyond a hefty burden on the tax payer. From 90 000 layoffs , to debt crisis, to making India an avoidable investment destination , to the supreme court’s sledge hammer on AGR to hiving off Fibre and Infra assets just to keep afloat , to insolvencies , to Telcos’ plans of ending investment cycle , to risk of duopoly , to collapse of ancillary industries, to innovation disincentivization due to sector stress, to 5 G delays , to additional burden on taxpayers for sustaining additional losses of incompetent and inefficient state Telcos – S N A F U ! !
Interestingly, this is not the first time the segment on the other side of the digital divide played footsies with Telcos.
Of misplaced adrenaline rush and Fear of Missing Out (FOMO)
2003 and 2016 have been bountiful years for our entertainment starved country. Incidentally ,these were the years that saw “Monsoon Hangama” and the carnival lasted for 3 years each. (It may be recalled that in 2006 , when Anil Ambani took over the reigns of the erstwhile Reliance Infocomm, among the first thing he did was to write off $ 0.63 B (INR 4500 Crs.) relating to handset costs)
After the launch of Jio in Sept. 2016 , incumbents ,despite finding new tariffs unsustainable, were forced to participate in the bloodbath so as to fortify their turf.
The net outcome each time was colossal loss cutting , weed out of cheap thrill seekers and deadwoods.
The subscriber market share frenzy was pretty much like the eyeballs hunt fiasco that led to the dot com bubble bust in the ‘90s – an absolute disregard for cash flow metrics.
Could incumbents have afforded to side step Jio’s tariff war ?
Discretion is the better part of valour. In my humble opinion, they could have chosen their battles and refrained from competing in the Bottom of Pyramid. Two data points endorse this point of view. Firstly, despite showering unlimited free voice and data free for over 7 months post its launch, Jio managed to pull only a minuscule part of incumbents’ business via Mobile Number Portability. (In 2016 , when Jio was clocking a subscriber market share of 160 M , only 3.8 M subscribers ported into Jio) . Secondly , and more significantly, all Telcos, without exception, now realise that there is no buoyancy in the abyss.
Airtel and Vodo-Idea’s decision to pull out from the low ARPU race with minimum monthly $ 0.5 (INR 35) recharge plans in November ‘18 was too little too late.
The real price of free voice and cheap data – A cognitive analysis
Back in the early ‘90s , Max Touch (now Voda-Idea) and now defunct BPL mobile were the only operators in Mumbai. Despite BPL’s undercut pricing , Max touch (rechristened to Orange) always maintained a stiff lipped approach and steered clear from competing on tariffs. One may recall , the Max Touch / Orange logo on handsets had snob appeal and were flaunted just like i-phones are these days.
Cut to today Voda-Idea is perceived to be a service provider with scant regard for quality.
According to Cisco research, 80 percent of mobile traffic is consumed indoors.
Now if voice is free and data dirt cheap , the straight effect is network abuse by people (who have ample luxury of time) sharing the same wireless infrastructure with those for whom mobiles are mission critical.
Building on to the opening note of this article, the steep tariff hike technically comes in as a blessing in disguise for high end users as one can expect fewer call drops and better data speeds going forward.
To sign off on a lighter vein, digital India seems to be helping the Indian economy in an unwitting way. For a nation that knows no tomorrow when it comes to making babies, one can deduce our population de-growth can only be attributed to this inexpensive, alternate form of entertainment provided by Telecom Service Providers
About the author – Rittesh Seth : Not known to take the path of least resistance, Rittesh is an entrepreneur and among the top 10 most promising telecom consultants in India. He started his Telecom career at a grass-root level with RCom -NIS in 2002 and earned his way to the elitist Tata Communications – TIEBU department (a handpicked special focus group that represented all the Tata companies in the telecom arena to pamper marquee corporates). He writes for the sheer love of Telecom and his contrarian industry analyses have been spot on, every time – A feat he owes to his bottom up telecom journey and his dyslexic abilities.
He blogs on https://teleprudence.wordpress.com/ and can be reached at rittesh@teleprudence.com or linkedIn.com/ritteshseth