Consulting Network » Telecommunication http://www.consultingnetwork.co.in Fri, 13 Jan 2012 04:39:53 +0000 en hourly 1 http://wordpress.org/?v=3.3.1 Telecom analytics continue to play a major role in company performance http://www.consultingnetwork.co.in/telecom-analytics-continue-to-play-a-major-role-in-determining-company-performance/2322/?utm_source=subscriber&utm_medium=rss&utm_campaign=rss http://www.consultingnetwork.co.in/telecom-analytics-continue-to-play-a-major-role-in-determining-company-performance/2322/#comments Tue, 21 Dec 2010 22:14:16 +0000 Anand Rao http://www.consultingnetwork.co.in/?p=2322 Indian Telecom is the fastest growing industry next only to the IT industry. Investment in the Indian telecom sector is forecasted to peak at $40 billion during the current fiscal as the country presses on to build a network of one billion mobile phones over the next two years, the Telecom Equipment and Services Export Promotion Council has said. Much of these positive effects and growth of the industry were driven by numerous regulatory and policy changes in the country over the last two decades.

The presence of 15 operators scattered around 22 circles, competing for the pie of the customer market share (CMS) and revenue market share (RMS), is currently driving continual change in the telecom industry. The market is already experiencing high pressure on profit margins and slower revenue growth. In addition to this, the market is already battering major issues in regulation and policy stemming from a possible probe into the 2G spectrum scam that a government audit says was awarded too cheaply losing out a mind boggling figure of Rs. 1.76 lakh crore. While the Public Accounts Committee takes care of the spectrum scam, one can only hope that justice prevails and those found guilty are dragged to the court.

In the meanwhile, operator must continue to focus on new business models and bringing radical changes to the products to improve profitability. Given the nature of the competition, mergers and acquisitions in this industry is inevitable. As market penetration reaches a saturation point, competition for existing customer increases. Further the introduction of the mobile number portability (MNP) and 3G services creates challenges for the operators to retain existing customer, while simultaneously focus on bring on new customers. While the 3G service roll outs would depend on the handset penetration, quality of service and network performances in each of the 22 circles, MNP is here to stay and play a huge part in driving the business operations and services of the operators.

Telecom analytics will continue to play a major driver in understanding the customer base. Understanding prior customer behavior helps a company provide offers that are more personalized and attractive, thus increasing customer loyalty. As the market evolves and new products are launched, analysis becomes critical to understand the tariffs, product and service migrations, customer profitability and loyalty. Telecom data is complex. Companies sweat it out to make sense of data from legacy systems, customer service applications, and thousands of product and activity codes. Further, the complexity is added when drilling down to features, add-on tariffs, bundles and packages. Operators, who are focused on analyzing these trends either through self-managed teams or through outsourced analytics group, would benefit the most in understanding the trends in the market.

The foundation for performing complex analysis is thus based on accurate subscriber metrics. Statistical and predictive behavior modeling form the cornerstone for these data analysis. And the factors that one needs to focus to ensure continuous analysis during the new business launch, joint ventures or acquisitions are flexibility to adjust market changes, scalability to handle large volumes and accommodate growth, compatibility to integrate seamlessly, audit ability and vendor knowledge. The proper understanding of these factors and the appropriate means of addressing them will be critical in determining the winners and losers in the marketplace.


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]]> http://www.consultingnetwork.co.in/telecom-analytics-continue-to-play-a-major-role-in-determining-company-performance/2322/feed/ 0 Does 3G have a Viable Business case for Emerging Markets? http://www.consultingnetwork.co.in/3g/1204/?utm_source=subscriber&utm_medium=rss&utm_campaign=rss http://www.consultingnetwork.co.in/3g/1204/#comments Fri, 21 Aug 2009 20:03:36 +0000 Mohit Agrawal http://consultingnetwork.co.in/?p=1204 Martin Varsavsky, CEO FON (largest Wi-Fi network operator) once said “We are sorry for telecom operators who made the mistake of 3G but it’s not our fault”. Another top executive at one of the European operators had once remarked that “For operators, 3G is essentially a waste of money”. There is a lot of media hype in the emerging countries like India and China on 3G roll-out but the business case for 3G is still far from being viable. The expectations of high consumer adoption leading to increase in ARPU are yet to be realized.

In the emerging countries, either the 3G services are yet to be launched or the 3G subscribers are below 10% of the total subscriber base. Only South Africa and Malaysia have higher then 10% subscriber base with 3G subscribers at 10.7% and 18.3% respectively. It is not surprising that these are the only two countries that have high 3G base as the ARPU in both these countries is higher than that in rest of the emerging nations and data ARPU is also higher. I have a theory that either the total ARPU should be over $10 per month or the data ARPU should be over 15% of total ARPU for the 3G services to gain traction. Any country that does not fulfill any of the above two criteria will find it difficult to have a viable 3G proposition. The reason for taking these two as criteria is that if the ARPU is low, it would take a long time to breakeven and it is very difficult to increase the ARPU in any market unless there is a genuine appetite for value added services which is reflected in the greater than 15% data ARPU criteria. In the chart below (click the chart to enlarge), the countries that fall in the lower part of the graph are likely to be less successful in the 3G space while the countries in the blue area are more likely to be successful. China, Indonesia and Philippines are the other three countries apart from Malaysia and South Africa that are likely to succeed in making the 3G a viable proposition. Sri Lanka is a borderline case but given the low ARPU of this market, I am more inclined to say that it would find it extremely difficult to be successful.

3G framework

The consumers in the emerging nations are highly price sensitive and hence it is not surprising that most of the tariff related innovations have come from such countries. The fall in 2G tariffs led to increase in penetration but the falling tariffs could not compensate by the increase in usage (MoU) leading to sharp fall in ARPUs. Given the income levels in emerging nations, the average amount spent on communication services as percentage of total income is very high and hence I do not see the ARPU levels going up even if the quality of service improves. The consumers are well aware that for the price they pay, they would need to compromise on the quality of services and hence so do mind if the services are not at the same levels as some of the more developed countries. Hence, the consumers are not going to shift to 3G unless there is a killer application that would make them sit up and take note. Unfortunately, there is no killer application on 3G. Most of the current applications like email, chat, social networking, internet radio, etc. work well on the current 2G and 2.5G networks. It is only the experience that is better on 3G due to higher data speeds but there is no 3G only application that has a mass appeal. People initially were gung-ho about the video telephony but now it appears that not too many consumers are enthusiastic about it.

Another common myth is that 3G is more efficient than 2G in terms of operating expenses (OPEX) and hence it would result in higher operating margins for the operators. I do not deny that 3G is much more efficient than 2G but at capacity. 3G has three times more capacity than 2G but since most of the networks across the world are on 2100 MHz, the number of sites required to provide coverage are 2.5 times more than that for 2G on 900 MHz. This means to provide coverage, 3G would be more expensive as it needs more sites but the requirement for capacity sites would be smaller due to higher capacity of 3G. Hence, only if the network utilization were to cross a particular threshold, 3G would be beneficial.

Any operator while launching 3G services would go through the following three phases:

  1. Roll-out for Retention: This is the first stage of 3G network roll-out. In this phase, the carriers are not too sure about the 3G potential and would launch the 3G services in the areas where the high ARPU consumers reside or work. This is essentially a step to retain their high ARPU base and the cost involved in launching full scale 3G services is very high.
  2. Roll-out for Capacity: As the 3G usage increases and more consumers start to adopt 3G services, the carriers need to increase capacity and the coverage area. The business case starts to look better but this phase is the most capital intensive one as well.
  3. Rollout for Cost Efficiency: This is the stage in which the real benefits of 3G services start to appear. The focus of the operators in this phase is to have an optimum mix of 2G and 3G subscribers and looks to switchover to 3G completely as the capacity benefits of 3G come into play. This stage has so far been crossed only in Japan and Korea. In Japan, the carriers stopped offering 2G services around two years back to reduce OPEX and complexity in managing multiple networks.

It is a mistake to assume that 3G services are more cost efficient as the cost efficiency roll-out is the last stage and it can only happen when the first two stages have been crossed. The high population density in developing countries does not mean that the first two stages can be crossed quickly.

I have my doubts on the business case for 3G services in developing countries and unless it can provide a compelling reason for its adoption, the 3G services would continue to pull the EBIDTA down for the carriers.

Also Read: Mobile Broadband-Drivers and Inhibitors

Read other articles from Mohit at http://www.telecomcircle.com


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]]> http://www.consultingnetwork.co.in/3g/1204/feed/ 1 Impact of Economic Crisis on Telecom http://www.consultingnetwork.co.in/economic-crisis-telecom/550/?utm_source=subscriber&utm_medium=rss&utm_campaign=rss http://www.consultingnetwork.co.in/economic-crisis-telecom/550/#comments Tue, 24 Mar 2009 12:43:47 +0000 Mohit Agrawal http://consultingnetwork.co.in/?p=550 economyRead my other articles on www.telecomcircle.com

The financial crisis that engulfed the world last year is now playing out in full proportions. This has spread to each industry and telecom industry is no exception. The impact of the recession in the western world and economic slowdown in the emerging countries is being felt in a big way by all the players in the ecosystem. It can be predicted that 2009-2010 will mark a very difficult and crucial period for the entire industry. This post is to analyze the impact of the crisis on each of the players and what can they do to minimize the impact

 

Carriers: It was earlier thought that the carriers would be spared from the impact of economic crisis. However, it is increasingly evident that they are indeed getting impacted due to restricted access to capital and consumers limiting their usage. In many emerging markets across Asia and Africa, the operators are small and dependant on the foreign capital to expand. The operators are constrained not only by the capital for investment but also by the lack of working capital. Lack of new investments is having an adverse impact on network coverage expansion. 3G auctions planned in many countries have also been shelved for fear of non participation by large operators. Investments in new technologies like LTE and WiMax are likely to be scaled down and I would not be surprised if many proposed installations of WiMax are permanently permanently after reviewing the business plans in light of current crisis. International long distance carriers are likely to see sharp fall in the traffic, due to lower IT spending and lower cross-country investments, which is unlikely to be compensated by the increase in traffic due to travel restrictions across the companies. The operators may resort to tariff reduction in a bid to increase the minutes of usage (MoU) but this would restrict their ability to offer flat data prices or other innovative data models. I foresee consolidation happening amongst carriers as the weaker ones bow out of the industry.

 

The operators would do well by concentrating on cost reduction initiatives. They may follow the initiatives of the Indian operators by adopting light-asset operation models, putting greater pressure on equipment vendors to adopt new models like managed service and capacity service. The carriers would do well by actively engaging in all kinds of infrastructure sharing opportunities. The cash rich operators may look for new M&A opportunities and cash strapped carriers will do well by limiting the handset subsidies. It is estimated that the industry spends over $50 billion in handset subsidies alone.

 

At least in the next three years, the traditional CAPEX will experience a CAGR of -3% to -4%, which forebodes a turning point for industry transformation. When revenue from voice services and traditional CAPEX cannot cover operators’ total cost of ownership (TCO), new services and new investment will become new opportunities and breakthrough points. New information consumption models, mobile broadband, and Internet applications will become the highlights of growth. This is the right time to evolve new business models to increase services consumption. Enhanced service consumption would ultimately benefit the carriers when the things start to improve. Operators can present mobile broadband as a viable alternative to fixed internet

 

Handset Vendors: Handset vendors were the first ones in the ecosystem to feel the pinch of the economic crisis. The replacement cycles lengthened which resulted in the lower replacement volumes and overall demand for new phones. At the same time, the device vendors witnessed heavy down-trading of devices by consumers leading to lower ASPs. The operators in the developed economies started to reduce the subsidy which also had an adverse impact on the value of the market size. The consumers on their part started to go for lower value contracts when their contracts were up for renewal and that lead to further erosion of device ASPs. Various device vendors and industry analysts have estimated the demand to be lower in 2009 by 5-10% over 2008.

 

Handset vendors need to focus on the costs and supply chain. Vendors may need to shift their high cost manufacturing units to locations where the cost of production is lower. New cross currency dynamics may also play a part in optimizing costs. They also need to rationalize the number of models to have better utilization of marketing monies. The emerging markets like India, China, Nigeria, etc. have been adding record subscriber additions which to a large extent are compensating the device vendors for loss of replacement volumes. The handset vendors should focus on value for money models and can learn from their experiences in emerging markets. I mean they can launch highly successful models of the developing countries in the developed markets and thereby increasing their market share as well as lower the cost of the model due to economies of scale. The handset vendors may also need to take a relook at their business models, partly due to the fact that carriers across the world are reducing subsidies and partly to emerge as end to end solutions player (e.g. RIM, Apple). The lower margins in the devices can be off-set with some of the services revenues if the solution is easy to use and relevant to consumer needs.

 

Equipment Vendors: The equipments vendors would be under pressure due to reduced investment by operators. However, if they focus on the managed services, they can get additional recurring revenue streams that would make up for the lower spending on network. The equipment vendors should wear the consulting cap and develop a provocative point of view on critical issues (like mobile broadband) that would entice the customers into spending. The vendors should try to develop new business models based on revenue share rather than fixed costs where the payments are linked to the benefits that the customer gets from the solution.

 

Content and Application (C&A) Providers: In one of my previous posts, I had predicted that the mobile entertainment would increase in times of recession. I got many responses from the readers both for and against the argument. I still stand by it that if the content is really good and affordable, it could be the cheapest source of information and entertainment in such times. If there are applications that help in job search or skill enhancement, they are bound to find favor amongst consumers. Relevance and pricing would be the key. However, lack of available funding to finance the development of new applications, and faster migration to ad-funded services – would have an impact on revenue growth.

 

C&A providers need to take a hard look at their business models and need to incorporate new ways of reducing cost of ownership for the consumers. C&A providers can look at sachet model to offer content at affordable pricepoints or they can offer unlimited access to content for a fixed fee. With the launch of new application stores by Nokia, Samsung, Microsoft, etc. the content providers should focus on the new application stores to compensate for any loss on the operator portal.  The economic downturn will push operators to release their grasp on the mobile content industry and open-up mobile Internet. This would be a great opportunity for the content providers to increase their revenue share and offer content at affordable price.

 

In summary, it is clear from the above discussion that each of the players of the ecosystem would need to take a relook at their business models. The winners would be decided on the basis of the innovation that they can bring to their business models. The survival of organizations would not depend on how fit they are but how responsive are they to change.


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]]> http://www.consultingnetwork.co.in/economic-crisis-telecom/550/feed/ 0 Emerging Trends in Telecom – by Ashutosh Madan http://www.consultingnetwork.co.in/emerging-trends-in-telecom-by-ashutosh-madan/416/?utm_source=subscriber&utm_medium=rss&utm_campaign=rss http://www.consultingnetwork.co.in/emerging-trends-in-telecom-by-ashutosh-madan/416/#comments Fri, 27 Feb 2009 17:45:46 +0000 Mohit http://consultingnetwork.co.in/?p=416 indian-telecom-subscribersTelecom is a booming industry. GSM alone (which is about 85% of world-wide wireless market) contributes about $ 3 Billion revenue every day. While all sectors of economy are getting badly impacted by the economic recession and liquidity crunch, impact on telecom is a little less severe, at least in countries like India & China. Some people even argue that as the organizations tighten their belts and reduce their expenditures, it may possibly lead to accelerated growth in some segments of telecom industry. Tightening economic conditions are likely to make ‘work from home’ preferred option – both for employers as well as employees. At the same time, video conferencing is becoming preferred mode of communication & relation building with customers. All this is resulting in need for better & reliable communication leading to accelerated up-gradation to IP networks, further penetration of Fibre in the access network and rapid development & deployment of  other associated technologies..

 

Keeping the above discussion as the back-drop, this article looks at the emerging trends in Telecom industry in medium term horizon (3-5 years) from the perspective of 3 key players – Customers (end-users) who buy the services, Operators who sell these services and Equipment vendors who make these services technically feasible and available.

Customers

Customers are always looking for value for money – high quality services & abundant choice at a minimal cost! Key attributes are:

  • Quality: Crystal clear quality in all modes of communication, at all times
  • Quantity: Variety of services – Voice, Data, Video & Mobility – available at the same time, from the same device and at high data speeds
  • Cost: Customers have got used to the declining rates of telecom services and expect the trend to continue in future as well.

Operators

Some of the key challenges/opportunities for the operators are:

  • Customer care – Provide pleasant user experience and abundant choice in technologies and product packages
  • Outsourcing: Outsource Network and IT functions to focus on core aspects of their business and strategic initiatives
  • Inside building coverage – Ensure good coverage inside buildings even if it means sharing network resources with competitors as nearly 70% of the voice & data calls are expected to originate inside the buildings in the coming years
  • Coverage/Penetration in Rural areas – Adapt technology to make communication in rural areas profitable
  • Fuel bill reduction – Fuel & Power contribute about 25% of operator’s OPEX. Operators have great interest in technologies which reduce this expense as it improves their bottom line as well as earns approval from environmental considerations.

Network Vendors & Technologies

Technology advancements are driven by the applications which customers find appealing and solve the operational issues faced by operators. Some of the key ones are:

  • Triple Play, Mobility & Coverage: Customers want to be able to use the triple play services (Voice, Data and Video) all the time and everywhere – indoor or outdoor. Multi-billion dollars are being invested in development and enhancement of mobile technologies like 3G, WiFi, WiMax & LTE. Enhanced need for Indoor coverage is leading to development of Femto cells. Fixed Mobile Convergence (FMC) is also gaining increased importance as it makes sense to switch from Mobile access to wire line access as soon as wire line access becomes available
  • IP Technology: Development of MPLS technology which provides differentiated and assured Quality of Service (QoS) has overcome the best effort nature of IP telephony. Advancements in IP technology have also opened up new modes of communications like web-collaboration, intelligent call-centre applications etc. High quality video conferencing which provides almost a real interaction experience is likely to become killer application. DWDM enables very high bandwidth over fibre. Since high bandwidth needs to be available at the customer premises as well, Fibre is going to penetrate deeper in the access network as well.
  • Machine to Machine Communications: There are physical limits to the number of telephone connections that can be sold to human beings! Machine to machine communication can potentially increase it in the order of billions! For this to be commercially successful, it requires standardization of protocols & simplicity of operation

 

From the above analysis, we can see that changes in Telecom are taking at a rapid pace. And, these changes are being driven as a result of collaboration between three key entities involved. While the pace of the change may at times look over-whelming, customers have been quick to adapt to these changes and have enjoyed the benefits of the technology advancements. Despite the turbulence in the short run, journey of telecom evolution, indeed, looks very exciting in long run!

About the Author: Ashutosh Medan is an Associate Director with Capgemini, India.  He has over 16 years of diverse experience in Telecom. He has worked in the entire value chain of telecom – Network Commissioning & Deployment , Product Development as well as System Integration of IT solution for telecom operators. From technology perspective, he has worked in almost every area of telecom – PSTN, GSM, GPRS, VOIP, IN, PTT, OSS & BSS. He has worked with, as well as worked for, both Telecom operators & Network vendors. He has also authored & presented several papers/white-papers and has extensive experience in leading training programs.


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]]> http://www.consultingnetwork.co.in/emerging-trends-in-telecom-by-ashutosh-madan/416/feed/ 0 My Predictions for Telecom Industry in 2009 & 2010 by Mohit Agrawal http://www.consultingnetwork.co.in/my-predictions-for-telecom-industry-in-2009-2010/406/?utm_source=subscriber&utm_medium=rss&utm_campaign=rss http://www.consultingnetwork.co.in/my-predictions-for-telecom-industry-in-2009-2010/406/#comments Sun, 22 Feb 2009 16:49:26 +0000 Mohit Agrawal http://consultingnetwork.co.in/?p=406  

  1. Greater focus on data services and fewer tariff wars as focus shifts to managing EBIDTA margins
  2. Both the handset manufacturers and operators would focus on the handset OS platform
  3. Smart Phones likely to be the fastest growing category amongst handsets
  4. Handset vendors to aggressively push GPS
  5. Mobile RSS Feeds and Widgets to emerge stronger
  6. Social Networking (esp. IM+eMail) to be the driver of Internet adoption on mobiles
  7. Music, video, gaming and location to adopt the social networking platform which would in turn drive their adoption
  8. Mobile Money Transfer (MMT) to gain traction with Central Banks across the world coming out with regulations in favour of MMT considering the convenience and high penetration of mobiles
  9. Mobile applications to get mainstream
  10. Carrier Walled Gardens would disappear leading to better content development by independent VAS companies
  11. 4G technology debate to be decided in favour of LTE. WiMax would go down fighting but will still manage substantial installations as a support to 3G/LTE
  12. Consolidation amongst carrier and cross-border deals in emerging markets likely to give boost to M&A activities
  13. Mobile entertainment to grow as the cheapest source of entertainment during the tough economic conditions

For my other articles, please visit www.telecomcircle.com


Views expressed by Authors/Users/Subscribers etc on this website are completely their personal views and in no way reflect the views of their employers or any connected parties. Please view our detailed Terms & Conditions.

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