[sbinews] Telecom - Sunrise Industry

  • From: sbistcbangalore@xxxxxxxx
  • To: sbinews@xxxxxxxxxxxxx
  • Date: Mon, 22 Dec 2003 20:44:10 +0500

Telecom: The sunrise industry

[ SATURDAY, DECEMBER 20, 2003 11:25:00 PM ] 
India is now one of the fastest growing telecom markets with a high subscriber 
acquisition rate in the wireless segment. As and when the dust finally settles 
over the bizarre and tortuous road to telecom reforms, the telecom market and 
the wireless players should brace themselves for fiercer competition. 

How should wireless players plan and implement their offerings at a time when 
it will dominate fixed wire because of user convenience and falling tariff s. 
As cellphone prices decline, regions with negligible wireless penetration such 
as the North East, eastern UP, Bihar , Orissa and West Bengal will witness 
rapid growth. 

The subscriber growth rate, is attributable to lower acquisition and usage 
costs due to competition. We remain a low revenue per subscriber market similar 
to China , with the average revenue per subscriber being around Rs 700-800 per 
month. Voice dominates over ‘data’ services, though SMS and other services have 
begun to contribute 5-10% of total revenues. Data services such as ringtones, 
polling, gaming and informational services are impacting subscriber usage. 

Use of MMS, video clip downloads and (advanced) interactive/transaction based 
services are at an incipient stage. Subscribers use cellphones mostly for local 
calls. For STD and trunk calls, they prefer fixedwire due to cost 
considerations. Roaming calls are avoided due to high costs, and roaming SMS is 

Given the above scenario, let us examine the way forward for services. There is 
not much that telcos can do to make voice and roaming more attractive except 
lower costs and bundled with features. SMS or texting, on the other hand, is a 
proven success and has become commoditised. Innovative texting, such as e-mail 
alerts, e-mail summary, workgroup broadcast and other communication services 
will help increase usage. The success of i-mode, is important in this context. 
i-mode, the wireless data service arm of Japanese telco NTT DoCoMo, was 
launched in February 1999. It had 29 million subscribers a year after launch 
and has about 44 million as of March 2003. Its share of the Japanese wireless 
internet subscriber market stands at 60.5%. The number of wireless internet 
subscribers in Japan using cell phones has grown almost 12 times in the last 
three years, from about 4.5 million in January 2000 to about 61 million by 
January 2003. Fixed wire internet subscribers grew from 11 mill
ion to about 23 million, a mere two-fold increase over the same period. Is 
there a lesson in it for us in India ? Fixedwire connexions and Net access is 
limited and relatively expensive in Japan , as it is in India unlike in the US 
where local calls are free and so is fixed wire internet access. 

Let us see the business model of i-mode and try to evaluate the raison d’etre 
for its spectacular success. Here are some of its key elements. 

Customer  focus: From day one, i-mode focused on ‘normal’ consumers, rather 
than PC and internet-savvy professionals and businessmen. DoCoMo recognised the 
potential of the youth, who are apt to try out new products. 

Services : i-mode’s management chose the right mix of services to offer: M- 
commerce ( banking and stock trading, on line stores for CDs, books, airline, 
hotel & travel reservations, event ticketing, database access services, 
entertainment services (games, ringtones, cartoons, karaoke) and news services. 
E-mail is a major application, with almost half the i-mode subscribers availing 

The basket of services are continuously refreshed with newer, more easy and 
innovative offerings .  

Content : i-mode partnered with content providers for official (and unofficial) 
i-mode sites. The partnership with content providers has been such a success 
that surfing the thousands of sites provides new value for money services. 
Cross selling has also taken off with airlines, banks and consumer product 
companies - Sony being a prime example - offering their products and services 
to a large captive target. 

Technology no, brand positioning yes : In a refreshing contrast to the 
technology-obsessed positioning of telecom services in Europe (WAP, 3G), i-mode 
strove to develop and establish a strong brand. It, however, leveraged 
technology to provide a distinct and superior customer experience. Phone 
manufacturers developed attractive and technologically advanced phones 
specifically for i-mode. Similarly content providers developed content 
exclusively for i-mode. This enabled  strong brand awareness and recall. 

Effective use of customer feedback for anticipating and developing customer 
requirements remains another element in the business model. For instance, 
respondents to a customer questionnaire in 2002 on the kind of functions 
desired on the handset had 75% of them requesting ultra high speed data 
transmission as their first choice, with voice identification function at 50% 
coming at fourth place. 

DoCoMo has been able to persuade its partners to collaborate on joint 
development primarily due to its then existing market presence and market 
share. A strong brand image helped. In terms of technology, i- mode used a 
variant of HTML, and packet switching — always on internet over circuit 
switched digital voice. Since the use of HTML is widespread, applications were 
developed quickly. 

Finally, costs: Costs are always tied to the value delivered and i-mode was 
able to develop a price model and a payment system just right for their market. 

Subscribers are charged on the basis of a low entry fee and costs are on the 
basis of data downloads, rather than connexion time. An average i-mode bill 
will set you back by around $17, that is about Rs 777-- a figure that’s near 
the average monthly wireless bill here. 



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