Per-second billing seen hitting telco revenues by 15%
The per-second billing system for calls, pioneered by Tata DoCoMo, has the potential to bring down the sector’s revenues by 10-15% if other operators follow suit, according to analysts.
By Rashmi Pratap, ET Bureau |
MUMBAI: The per-second billing system for calls, pioneered by Tata DoCoMo, has the potential to bring down the sector���s revenues by 10-15% if other operators follow suit, according to analysts. Already, new entrant Shyam-Sistema has replicated Tata DoCoMo���s per-second pricing model. While it is not yet known if other operators will also offer the plan, it remains the biggest risk to the overall sector, analysts tracking telecom said.
���Our analysis suggests that if competitors ��� incumbents and newcomers alike ��� switched to a similar plan, the sector could see a revenue loss of around 10-15%. We believe the per-second pricing plan is likely to appeal to mid-to high-end users. In our view, if the company ends up acquiring moderate usage subscribers, incumbents may be forced to re-think their tariff strategy,��� said Rajiv Sharma of HSBC Securities and Capital Markets.
Revenues of the Indian telecom industry are expected to grow to more than $30 billion by 2013, according to technology research firm Gartner. ���We view a move to per-second pricing as the biggest risk to the incumbents and the overall sector,��� Mr Sharma said.
Tatas may be looking at repeating the magic of ���two-year validity��� scheme through its per-second billing plans. In 2005, Tata Teleservices had rolled out the scheme, followed by lifetime validity, which has been a game changer in the Indian telecom landscape.
This time, Shyam-Sistema is following the offer by Tata DoCoMo, GSM service from the Tata group stable. ���We intend to ensure that the segments attracted to this proposition can also avail of it with MTS (Shyam-Sistema���s brand) so that we can maximise our appeal. In particular, small business segment like this product as they believe they make many short calls,��� Shyam-Sistema chief marketing officer Leonid Musatov told ET.
According to Idea Cellular chief marketing officer Pradeep Shrivastava, ���Mobile telephony is highly commoditised in nature because top players are simply matching each others��� offers in the market. For a new entrant, till network is deployed, it makes sense to provide offers to compensate for lack of coverage.���
Terming the entry of every new player as a ���game changer���, Mr Shrivastava said: ���It (per-second billing) will cause acceleration in acquisition, provided they (new operators) capture small towns and villages.���
However, Ascentius Consulting principal analyst Alok Shende said per-second billing is expected to have a varying impact on service providers. ���For the new players, the impact will be immediate since they are targeting the same set of new subscribers. But incumbents are unlikely to follow suit. ���Wait and watch��� will be their dominant strategy,��� he said.
���Our analysis suggests that if competitors ��� incumbents and newcomers alike ��� switched to a similar plan, the sector could see a revenue loss of around 10-15%. We believe the per-second pricing plan is likely to appeal to mid-to high-end users. In our view, if the company ends up acquiring moderate usage subscribers, incumbents may be forced to re-think their tariff strategy,��� said Rajiv Sharma of HSBC Securities and Capital Markets.
Revenues of the Indian telecom industry are expected to grow to more than $30 billion by 2013, according to technology research firm Gartner. ���We view a move to per-second pricing as the biggest risk to the incumbents and the overall sector,��� Mr Sharma said.
Tatas may be looking at repeating the magic of ���two-year validity��� scheme through its per-second billing plans. In 2005, Tata Teleservices had rolled out the scheme, followed by lifetime validity, which has been a game changer in the Indian telecom landscape.
This time, Shyam-Sistema is following the offer by Tata DoCoMo, GSM service from the Tata group stable. ���We intend to ensure that the segments attracted to this proposition can also avail of it with MTS (Shyam-Sistema���s brand) so that we can maximise our appeal. In particular, small business segment like this product as they believe they make many short calls,��� Shyam-Sistema chief marketing officer Leonid Musatov told ET.
According to Idea Cellular chief marketing officer Pradeep Shrivastava, ���Mobile telephony is highly commoditised in nature because top players are simply matching each others��� offers in the market. For a new entrant, till network is deployed, it makes sense to provide offers to compensate for lack of coverage.���
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Terming the entry of every new player as a ���game changer���, Mr Shrivastava said: ���It (per-second billing) will cause acceleration in acquisition, provided they (new operators) capture small towns and villages.���
However, Ascentius Consulting principal analyst Alok Shende said per-second billing is expected to have a varying impact on service providers. ���For the new players, the impact will be immediate since they are targeting the same set of new subscribers. But incumbents are unlikely to follow suit. ���Wait and watch��� will be their dominant strategy,��� he said.
He said that Tata DoCoMo���s offering is unlikely to cause any significant exodus from incumbents��� networks. ���Besides, if incumbents start losing marginal subscribers, they can offer selective drop in pulse rate without necessarily matching the per-second offer,��� he said.
Also, the fear that offer could lead to industry-wide adoption and will reduce the industry revenues is exaggerated. ���Historically, the Indian market has been highly price elastic. So, lower prices have a tendency to increase the minute of usage over medium term, thus offsetting any risk of revenue drop,��� Mr Shende added.
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