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Telecom Companies Revive Value of the Indian Paisa
Sanjit Chatterjee
Tuesday, June 1, 2010
Visiting us during her vacations, Manjari, my teenage niece, asked me if I would help her with a summer project. I agreed. It involved the study of coins. The curious kid wanted to know what a one-paisa coin looked like. Her next question: ‘What can one paisa buy?’

We were amused as to why a teacher would give a ‘one paisa’ project when the cheapest toffee costs 50 paisa, or around one cent. Manjari’s search into the shape, size, and metallic content of one paisa coin landed her at the Reserve Bank of India’s (RBI’s) monetary museum. She learnt that over a period of time, the cost-benefit considerations led to a gradual discontinuance of 1, 2 and 3 paisa coins in 1970s.

Then came a discovery of sorts. There was something that was worth a paisa — offered by the burgeoning, yet highly competitive, Indian telecom industry. For just one paisa, one can talk to someone in the farthest corner of India for one second, or send an SMS of 160 characters to any one of the 600 million mobile phone users in India. Not only that, one can extract more from the service provider if the bill plan is well chosen. Of course, it also depends on the desperation of the service provider to acquire and retain a customer.

The Indian telecom industry, the world’s fastest growing, must be credited with applying all the marketing tricks ranging from product or service sampling, marginal costing, happy hours, family and friends packs among others to hook the customer.

This explains the offer for sending 15,000 SMSs for Rs.99 (around $2) a month — a cool 3 SMSs for 2 paise. Or for just Rs.299 (around $6.5) to call 65 hours, or full-hour of talking with your mother for under Rs.5 (11 cents). If your circle of friends extends nationally, at Rs.599 ($13.3) per month plan you can talk for 65 hours, packing in 60 minutes of calling for a little over Rs.9 ($2).

For the service provider there is little money to be made in the local or long-distance calls from and individual subscriber. However, money is made from value added services — ranging from ring tones and astrology, music downloads and jokes, stock alerts to cricket scores, International calls and data services. It is estimated that there are at least 100 different services that add up to plum value added services. There is hardly a subscriber who has not subscribed to a service or two at a minimum of Rs.15 (33 cents) per month.

If you include data services like browsing the web to send email, downloading music or streaming video to watch TV, the billing potential for the mobile companies is huge and is likely to grow manifold in the third generation (3G) regime. By subscribing to data packages on a mobile phone the subscriber can navigate unknown routes or even make international calls for a song.

While all 600 million Indian mobile subscribers don’t own a handset that supports data services, it is only a matter of time when some of the cheaper ‘copycat’ look-alike handsets — as market researcher, IDC calls them — will be within every mobile user’s reach for as little as one-tenth the average price of a smart phone.

Industry analysts expect that a number of service providers could be offering mobile voice over internet protocol (VoIP) services to offer cheap international calls. Right now making international calls is not only expensive it also needs activation, often for a fee and a fat security deposit. Once the mobile VoIP services are available, the call rates could drop from the current Rs.6.40 (14 cents) per minute at the lower band to as low as Re.1-Rs.2 (2-4 cents) per minute.

Already a few options like the iTel Mobile Dialer Express available in the market allow a phone subscriber to make VoIP call from the mobile phone. With the mass deployment of Wi-Fi networks in many countries and the introduction of cheap GPRS service, calling from mobile set using VoIP technology is getting popular.

The telecom tariffs in India, among the lowest in the world, have silently been making a visible difference at the sociological level — you see it in a bus, train or plane. At another level there are mobile air space consumers who are busy converting phone calls from a primarily day time activity to a 24/7 activity.

With a variety of cheap night-time calling packages on offer, it is not uncommon for friends to call each other late into night and for much longer durations. With value offerings targeted in the non-peak hours, the service providers have been able to make inroads into the sleeping hours of young student community successfully.

The time is not far when the mobile revolution will embrace the remaining half of the country — at a steady rate of adding 20 million new mobile connections every month — in less than three years. The economies of scale will hopefully extract the India demographic advantage for many more seconds at the cost of a single paisa.

The author is Director Global Marketing and Strategy, REVE Systems
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