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Increased network coverage, innovative VAS, targeting niche segment, low ARPU solutions, and affordable network construction cost can boost telecom profits for operators, observes Huawei study

Network operators in India have achieved 500 mn subscribers in both wireless and wireline segment well before the set deadline of end of 2010. But are they happy? Certainly not. The reason is obvious: ARPU is declining day by day while more and more new operators are entering the market, giving cut-throat competition to the existing players.

Global operators are entering high growth markets (HGMs) like India, China, Brazil, and South Africa which offer unprecedented opportunity, as these markets are ripe for new technology, owing to their tremendous, and often unconnected, population base, high-level of business activity, and tourism. Existing Indian operators and new entrants are investing more resources, as telecom penetration particularly at rural circles is still low standing at about 19% while the demand for telecom services is high and growing. In its study “Extending the Reach of Telecommunications Services in High Growth Markets”, Huawei Technologies studied to find out how operators can succeed in the high growth markets like India.

Increased network coverage: 500 mn existing subscribers and large number of potential subscribers can offset declines in operators' ARPU. However, operators need to have stable and scalable networks to support increased end-users; otherwise operators' reputation and customer loyalty will be in danger and growth will not be sustained. Number Portability is another threat for customer loyalty. Planning network expansion carefully is especially important for telecom services providers in these markets. It is important for SPs to improve QoS by deploying new networks and solutions which are cost effective and best to realize their strategic goals.

Innovative VAS: It is forecast that data revenue will increase at a rate of 79% globally over the next five years. For data/VAS revenue earning, low-income group of HGMs are very crucial. SPs need to understand the specific segments within the low-income category in order to offer innovative VAS that cater to their needs, while creating value to an operators' brand and boosting profit margins. “Village telephone,” “Medical hotline,” and “CellBazaar” are examples of technologies that have had a real impact in the rural areas and brought business success for operators.

Targeting niche markets: Another important strategy for operators to increase ARPU in India is to target specific groups whose consumption behaviors in telecom services and gadgets are of high value to services providers. Particularly, young consumers, who make up a large percentage of the population in India are embracing new technologies faster than more mature consumers.

Low-ARPU Network Solution: A low-ARPU solution can ensure business success for operators, while helping end users gain equal access rights to information networks. With the help of the operator's network, a rural mountain village can step into the digital world helping poor villagers to change their destinies through modern communications.

Affordable Network Construction Costs: Given the large proportion of network infrastructure investment costs in India, it is crucial for them to manage network construction costs under control. Compared with developed countries, India has the advantage in terms of low real estate price, low capital construction, and cheap labour. Indian operators major network cost pressure comes from network facilities, and network equipment prices are not very flexible. To drastically slash costs, the operators have no other alternative but to pursue technological innovation in addition to adopting cost effective site design.

Kannan K

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