The case for a new telecom operator in India
July 17, 2011 Leave a comment
Yes, the title of this post sounds a bit crazy, given the intensely competitive telecom industry in India. Allow me to explain.
Large telecom operators in India are still focused primarily on new customer acquisition. New customers acquired in the market today are marginal, and must be lured using rock bottom pricing. Rock bottom pricing means rock bottom costing, which means low quality customer service, deprioritzation of network investments, and a generally poor experience for all customers. That’s why you and I can’t make a 15-minute call without dropping it or having connection issues. While operators struggle to maintain profitability.
Now imagine a telcom operator that doesn’t drop calls, delivers fast data downloads, respects you when you call in, and resolves your issues efficiently and politely. In other words, the AmEx of telcos. I am willing to pay more for such an operator, and my back of the envelope estimate is that there are at least 10M other such customers in India, and growing faster than market.
Most other services get segmented, and you see consumers willing to pay more for higher quality experiences. Think hotels, airlines, credit cards, retail, restaurants and real estate. Think Taj, Kingfisher, AmEx, Spencers.. You can choose to pay more and you generally get a better experience. Not so in telecom. There you only have the option of rock bottom pricing with rock bottom service.
One reason is that Indian telecom industry has till recently been focused solely on new customer acquisition for growth. This should change now, given that the market has been virtually exhausted. Another reason is that telecom is a scale business and larger operators have a significant advantage over smaller ones. However, given that these 10M+ consumers are mostly concentrated in a few geographical areas, it may be viable to run a smaller, but highly profitable telecom operator in India that focuses on quality rather than quantity. Any takers?