The telecom story in India was almost a fairytale till about last year. Wireless

RELATED ARTICLES Telecom stocks tank; Bharti down over 4% Raja gets bail; barred from visiting TN, DoT MTNL to offer VRS to about 20k employees; seeks BWA refunds Cellphone customer caught in the crossfire TDSAT restrains Etisalat from taking telecom gear at RInfra

mobile subscriber additions kept increasing month-on-month; telcos reached every nook and corner of the country; tariffs were at rock-bottom levels; both urban and rural teledensity was increasing, and there was only the upward growth curve.

Starting 2011, along with the scams that marred the telecom services sector, operational issues also started to hamper the growth pace. To keep up the momentum and simultaneously strengthen bottom line, telcos have started to focus on services beyond voice, expanded to the enterprise segment and increased tariff.

Samaresh Parida, strategy director of Vodafone Essar Ltd, said: “The whole industry and especially Vodafone are at a critical inflection point. We are moving from voice to data and consumers to enterprises.

So far as Vodafone is concerned, we are trying to become an end-to-end communication services company providing offerings including voice, internet, office networking and fixed-line telephone connections. Though we have started to offer these services, it will be a while before we start seeing substantial revenues. Over the next four years, we target about three times more revenue from the services. We would want the segment to contribute between 14 per cent to 16 per cent to our revenue.”

The enterprise business increases margins for telcos that are constrained by voice services and wafer-thin margins. Beyond that, the segment also ensures a regular stream of revenue. Most established brands are following the strategy to strengthen their top and bottom lines.

Shaily Shah, research analyst at Gartner says: “Only value-added services including data and internet hosting will improve revenue prospects of telcos. In most mature telecom markets, these value-added services have helped companies to boost their revenue when income growth from voice becomes stagnant. The market is moving more toward non-traditional avenues (apart from voice).”

One of the reasons why telcos had to find other streams for revenue is that they predominantly focused on acquiring customers but not retaining them. Moreover, cutthroat competition forced them to keep lowering prices despite losing money.

“Telcos don’t seem to have thought about customer retention till now. While they were scrambling to add more and more customers, retention was never their focus. However, now they don’t have a choice but to retain subscribers, especially the high revenue earning ones, so as to keep afloat. Indian telcos may resort to freebies and discounts like in other mature markets to retain customers,” adds Shah.

On the other hand, there is also the problem of inactive subscribers. These are the ones that exist only in paper but don’t contribute any revenue. Since October 2010 the Telecom Regulatory Authority of India (TRAI) started to report the number of active subscribers as opposed to stating only the number of connections sold. Over 30 per cent of subscribers were found to be inactive. Over a year has since passed but the situation doesn’t seem to have changed much.

Earlier, unused SIM cards, connections that are used by telcos for testing, SIMs in stock and distribution channels are now classified as inactive. Almost all the new players had at least 50 per cent inactive customers in the system this year. They sold bundled offers and freebies and focused only on increasing numbers. Only Idea, Bharti and Vodafone had over 80 per cent active customers. They continue to maintain the same.

As per the latest data available with TRAI, six companies out of the total 15 have less than 50 per cent active connections. The total wireless mobile subscriber base as of October 31 was 88.1 crore (recent most available statistic). Idea leads the pack with about 92 per cent active subscribers followed by Bharti with about 89 per cent and Vodafone with close to 81 per cent.

“Subscriber additions have been coming down since the regulatory body started calculating active subscribers. This is because of a ‘cleaning up exercise’ that every other operator is taking up as per TRAI regulations,” said a senior official of an incumbent player, on the condition of anonymity. “We are now taking inactive subscribers out of our system and this may further continue.”

In a highly congested market, telecom companies continue to lose revenue due to pricing and competitive pressures. Revenue leakages are adding to their woes. Tariffs increased by over 20 per cent since mid this year. “Let’s be practical. The price increase happened over after a decade. No sector will be able to sustain at such low prices. However, Indian mobile tariff is still much lower than those in most mature markets,” says Parida.