Those who were among the early adapters to mobile telephony in the early nineties might remember that the tariff for both outgoing and incoming local calls was a usurious Rs 16.80 per minute.
Possessing a hand phone was then a fashion statement as exclusive as sporting an Armani. Between 2004 and now, India’s mobile phone user universe has exploded from barely 30 million to about half a billion. The London-based Centre for Telecoms Research projects six hundred million plus users in India by early 2011. India’s truly remarkable mobile telephony revolution has, in the main, been driven by the relentless softening of both user charges as well as hardware prices.
Users vs shareholders
All this is great news for the user but not necessarily so for shareholders in mobile telephony companies. It’s almost analogous with civil aviation companies who are trapped in a fare war much to the chagrin of their lenders and shareholders.
An industry has to protect a bare minimum price line to survive, regardless of the mayhem that short-term oriented competitors may unleash. Air Deccan did not do its shareholders any favours in its pursuit of making flying not just affordable but even cheaper than rail travel at times.
The founder of course did not exit bruised and battered as we all know by now. His declaration of income to the Election Commissioner when he contested the last general assembly elections from Bengaluru was eye popping to say the least, considering that he conceived of, externally funded and operated an undisputed loss leader.
Sustaining the industry
As new entrants in the mobile telephony business resort to bargain basement user charges to make up for lost time, a responsible regulator ought to ponder the sustainability of the industry. Armchair strategists may well argue that mature mobile service providers ought to invest in research and roll out more value added services ( VAS) but for a relatively minimalist market like India, the potential for acceptance of VAS is restricted to the thin upper crust. This is a market segment that typically constitutes the “Blackberry Badshahs” or users of the highest end family of mobile devices like the Nokia “N 97”. At last count, Blackberry users in India had just breached the half a million mark. There is no verifiable data on the number of N 97 users in India but rough estimates suggest that they are about a half of Blackberries. How much of revenues can be derived from this thin slice by way of VAS is a no brainer. Also given that 80 per cent of mobile connections in India are of the pre paid genre, uninterrupted use is limited to just about a hundred million users. Given the brute majority of frugal mobile users who wait in the wings for cascading price reductions to enhance their usage, margins of our more established mobile telephony companies are faced with a battering ram.
The harsh reality is that mobile usage is no longer being perceived as a premium service but more as a faceless commodity that has to constantly bow at the altar of the hyper cost conscious generation of new users.
If our government had allowed a tenth of this level playing ground that they have charted out for mobile telephony, in other industries, we would have been reading the obituaries rather than annual reports of almost every other company by now.
The author is a veteran corporate analyst and
can be reached at
chiranjit.bangalore@
gmail.com