Making talk cheap
Manoj Kohli
Mobile telephony is increasingly taking the shape of a mass movement in India. The country is adding eight million new subscribers every month. With over 260 million consumers, we are now the second largest market in the world. Today, the mobile is an essential device for the masses, a sea change from the times when it was regarded as a luxury.
Telecom is a rare sector where tariffs have gone down despite inflation reaching a three-year high of 7.5 per cent. Call charges have fallen by about 95 per cent from its 1997 level of Rs 16. At Re 1 per minute, Indian mobile tariff is the lowest in the world, despite the fact that taxes and levies still account for as high as 30 per cent of revenues. An average American pays around Rs 13 per minute. UK and France have a rate of around Rs 7-8. Brazil, which is often compared to India, has a call rate of more than Rs 6 per minute.
People often wonder how this seemingly impossible task of cutting tariffs on a continuous basis has been achieved.The dream story of Indian mobile industry has been about constant innovations to achieve hyper growth and bringing down costs. In 2004, a unique business model of outsourcing networks and IT applications to strategic partners was tried out. This business model not only helped optimise cost but made the cost structure more predictable. Today, this has been replicated by other operators in India and globally.
Rapid network roll-out and deep distribution has been the mantra for Indian operators. Today, the mobile network covers over 70 per cent of India’s population. The mobile companies have been able to create a deeper retail footprint than FMCG marketers. What has also helped is that the price of handsets has also come down tremendously.
Mobile tariff innovations over the years have played a big role in the rapid penetration. Free incoming calls, lifetime-prepaid cards, recharge coupons as low as Rs 10 were all innovations which opened the service to a huge mass of potential customers. Along with the sharp drop in the rates, there has been increasing simplification and transparency in the tariff plans.
It is not just the local tariffs that have beaten India’s inflation though. Long distance and roaming rates has also seen bursts of huge cuts. While national long distance rates have fallen from a peak of Rs 24 to Rs 1.50, international long distance rates have dropped from Rs 96 to a low of Rs 7. Roaming rates have fallen from a high of Rs 10 to Re 1. Broadband rates too have been cut rapidly. In fact, customer additions in broadband have taken off by more than 50 per cent during the last one year alone.
Indians are heavy mobile phone users. An average Indian talks more than 500 minutes in a month, which makes India second among all nations on mobile phone usage. Two important demographic changes have made this possible. For millions migrating to urban cities, it is the only means of keeping in touch with families and friends. The other important change lies in the fact that 25 per cent of world’s under-25 population lives in India.
Telecom continues to beat inflation hands down. But it’s not just about beating inflation. The sector is effectively adding to everyone’s purchasing power by slicing off cost of communication continuously and significantly. Add to that the sector’s ability to create opportunities for direct and indirect employment all around. By making communication affordable and widely available, the sector is aiding the productivity of even the remotest farmer and shopkeeper in the country. In fact, we have just started realising the huge multiplier of speed, efficiency and productivity effect that the sector has on other sectors of the economy.
The telecom sector will face a stiff challenge of coping with increasing inflationary pressures on all its input costs to maintain the affordable tariff levels in the next few years. However, the good news is that the sector will continue to overcome any recessionary or slowdown trends in the economy, as there is still another 800 million population to be covered as well as the pent-up desire of a billion Indians to connect with each other.
The writer is CEO of a telecom company.
