Telecom In India: Should VAS be Outsourced

Long back I was having coffee with one of the senior member of an organization which was into management consulting. So I asked Rajat “What are issues you are facing today with respect to Indian Telecom market?” He said “Fortunately many and that’s the reason Telecom has become our core focus area”

 The main issues shared by him was as follows: 

1.       Revenue growth

2.       Subscriber growth

3.       Profit margin

4.       Many Operators leading to Price war

5.       Huge investment in 3G Roll out leading to high debt

6.       Rural Penetration

7.       MNP

8.       Security clearance for procurement of Telecom equipment

9.       Review of spectrum management and licence terms and condition

10   Re verification of mobile subscribers

11   MVNO

12    Network Operations

13  Saturation of voice. Not much usage of data

14    Off and On Termination of Prepaid service in J&K and north east

15   TRAI directive on Value added service

Well if you look at the above problems you will find out that all are inter related. I am going to take few points in this write up and rest of the points in part II of the write up (which will be released after 1 week ). In this article I am going to cover revenue growth, subscriber growth, profit margin, Price war, & TRAI directive on Value added service.

1.        Revenue growth – Telco’s are complaining that revenue growth is dipping year by year and the possible reasons given by them are many telecom operators operating in the same region, that leads to tariff war which further results into lowering down the tariff and hence it impacts the revenue growth. But my question here to all the old players“Yours is the established brand and brand recall value is much higher so why should you match your price with the new operators” For old players the strategy should be based on retention not on acquisition and for new operators the strategy should be acquisition hence one shall form the strategy depending on the no. of years spent in industry. Revenue growth is dependent on quality of customer you acquire so if you want to grow your revenue, look at the moment of truth, touch points for customer and make the experience WOW!  If you ask customer they are afraid of keeping the money in the mobile wallet as they feel that operators might deduct the money without informing. Remove that fear. Gain your consumers trust. Let them be your Product Advocate.  Create value for customers, emphasize on customer satisfaction, and award them for loyalty. If you look into these small things your revenue will grow automatically and you will be happy organization!

2.       Subscriber Growth – Well! When one talk about subscriber growth only one word comes in Mind “Channel Sales”. So channel sale is the department which brings sales for the operators, who are responsible for acquiring the customer. One of the important roles of channel sales is to convert potential buyers into profitable customers. Its operator role to decide the strategy for Channel sales. Usually there are 2 kinds of strategy seen in the market. 1. Push strategy 2. Pull strategy. Well for Channel sales all the operators in India use Push strategy. But overall operator uses both Push & Pull strategy. Whatever strategy you have chosen, one has to ensure smooth conversion. One should also understand customer need. There are 4 kinds of consumers 1. Repeated customers 2. High value deal seekers 3. Variety loving consumers 4. High involvement customers. Channel sales should be trained on probing because probing leads to real need of consumers and its easy to convert if you get the nerves of the customer.  We need to go off with the fake activation and high penalty should be imposed not only on the dealer but also on the channel sales representative. Operator need to have strong system which can monitor all these activities. It is worth spending on automation of channel sales. Also a system where one dealer can view the best practices of other dealer. Communication forum for all dealers.

Communication is the most important term for channel as causes of channel conflict are

 1. Goal Incompatibility
 2. Unclear roles & rights
 3.Differences in perception with respect to carrying higher inventory.

Hence communication is very important. So the best way to communicate to all dealers would be to launch Facebook for dealers where dealers can share their experiences and best practices. All the grievances can be addressed online, at the click of the mouse.  If you have clean system, system to monitor frauds, strong policy & clear procedure, trust me Subscriber will grow automatically. Happy & smiling dealers will lead to the quality sales and hence quality subscriber growth. I am again emphasizing on word quality customer because quality is going to help you in long term not quantity.

3.       Profit margin – Profit Margin is dependent on 2 main factors cost &MRP. You can control your cost if you make wise decision in controlling your expenditure. A good CEO should not only be good sales & marketing professional but should also have strong hold on finance. Usually there are 3 kinds of cost 1. Fixed cost 2. Variable cost 3. Overhead cost. Identify and eliminate those products/services that are unprofitable.  Lower the prices of those that are overpriced. Identify and eliminate production or service processes that are ineffective and allocate processing concepts that lead to the very same product at a better yield (process re-engineering aim). If you can control all these activities and rework on the processes, I am sure that will result into high profit margin.

4.       Price War –  Telecom has become an Oligopoly market.  Price war lead to short term gains for the organization but will damage the industry in the long term. We have seen Indian telecom market engaging itself into Price war. Price war can be attributed to the government policies. Price war leads to negative profits and sometimes can lead to the death of the organization. If Government is supporting price war then it should also have the policy of bailing out the organizations because such examples sends wrong message to the world and in future the investors will not like to consider India as the option to invest. So even for the government it might look good for the short term gain but its not viable option for long term. Operators should form the cartel on pricing. With the government support of not allowing many operators to operate and cartel formation by Operators on Price can control the price war but it doesn't mean that you increase the price substantially and it effect the normal customer. There should be policy on Price with minimum and maximum band by the government and the policy should be formed in consultation with the operators. Due to Price War we see only Top 3 surviving in the long run. Our pick would be AIrtel, Vodafone & Idea Cellular. We see many small players merging with bigger one's but we would like to give the standing ovation to the best launch team done by Tata DoCoMo team ! " Do the new" is their brand communication & one of our favorite.

5.       TRAI Directive on Value Added Service – VAS my favorite topic ! I can write Bible on VAS.  I appreciate the TRAI directive and its good for the consumers as well as operators. But the question here is “Should VAS be outsourced” Answer is yes it should be outsourced. Reasons are :-

• VAS partners have more expertise in handling the product
• Cost Reduction
• Experienced professional at the partner end.
• In house focus on core objectives
• Productivity and service improvements
• Win Win situation for both operator and Partner.

Operator should focus on their core business which is providing mobile solution to the customers and they should work on sales & core Marketing ( Prepay,Postpay & UnR). Other services like VAS ,Customer care , Network operations should be outsourced. 

VAS community should work together to bring tangible & intangible value to consumer along with excellent customer service to differentiate themselves. Operators usually blame partner for any wrong moves whereas its not the partner which is at fault but the operator itself. 

If you put unnecessary pressure on partners and encourage the wrong practices then they are bound to follow your instructions hence stop blaming the partner and try to build better ecosystem taking partners into confidence. Its like if the organisation is not performing well you cant put blame on employees, its the CEO responsibility not employees, in the similar manner if there is any mistake by VAS partner its the operator mistake not partner's. VAS community should put clean system which will result into customer Advocacy and hence increase in the product uptake. It will also result in Intangible benefits like trust of the consumer!

Happy Customers are Brand Advocates

Hope you agree with my points. At the end I would like to say that market share is determined by the four major components – 

Customer Penetration, 
customer Loyalty, 
quality of customer, 
Selecting the right Price. 

Work on these components and soon you shall be the market leader. I am sure you all have heard of Bell Curve so your market share will also be dependent on these major components and how you perform on the matrix of these components. We will never have straight line against X axis, We definitely will have Bell curve so your fitting in that curve is dependent on your overall performance. All the best and I shall connect with you again discussing other points.. Till then have fun  !