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Per Second Billing and how it is haunting the Indian telecom sector

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Boy-o-Boy!! Is the one second billing thing changing the face of Indian Telecom!

It makes me wonder if Tata DOCOMO has opened a Pandora’s Box of sorts taking the Indian Telecom Industry into frenzy.

mobile-phone-usage-per-second

Even with a little exaggeration, per second billing to me is as revolutionary as the invention of the telephone itself. No wonder the world wants to know how the companies are able to do so and make hefty profits at the same time.

A friend working at AT&T, US told me that that AT&T is actually studying the business model of Bharti Airtel to understand the magic formulae of customer friendly prices.

A few months back, the whole BHARTI-MTN episode was doing the headlines. Bharti had been oh so desperate to make it big as a global telecommunication giant. A part of that desperation according to me was the Indian companies getting over-competitive and ARPU’s being rather low in India.

But, with DOCOMO’s per second billing and the subsequent announcement of TRAI making it mandatory for all operators to introduce “Per Second Billing”, it sounded alarm bells all around the telecom sector and Bharti Airtel was no exception.

The announcement saw many operators sit down and put their efforts to come to terms with the per second billing. It is estimated that the telecom industry can lose billions in revenue.

So, it came as no surprise when Singapore telecom (SINGLTEL) announced that it would be increasing its effective stake in India’s mobile phone operator Bharti Airtel to 31.95 percent from 30.43 percent.

SingTel which is a sponsor for Bharti Airtel would purchase an additional 730,000 shares at an estimated payment of between 18,073 million to 30,084 million INR.

It is clearly evident that Bharti Airtel is feeling the heat after joining per second billing price wars. The constantly increasing competition in the Indian telecom sector is definitely not helping the matters.

On Friday, Bharti Airtel gave a downbeat outlook due to a price war after posting its slowest pace of profit growth in at least six years, sending its shares down nearly 7 percent.

With per second billing slated to decrease the operating margins, the profits are surely going to be hit, lest the ARPU’s see a dramatic increase.

It has been an eventful quarter for Bharti Airtel starting with the MTN deal and the SINGTEL announcement hence forth. In one line, I think what can be said about the recent developments featuring Bharti Airtel is,

The Buyer has turned Seller

The problems are not for Airtel alone though, until and unless the telecom operators find innovative ways to increase the user spending and do it fast enough, the telecom sector might face some serious problems. One area which each of them have to look at seriously making ground is Mobile Value Added Services. The basic telephony is just not enough for these companies to sustain.

What do you think of the “per second” predicament. The customer is surely going to be happy but how are the telecom companies going to cope with it?

[This post has been written by our regular contributor Ankit Agarwal, an ERP Consultant by profession, a wannabe entrepreneur and stock market stalker by passion]

  1. Aman says

    @ankit : that’s an insightful article.enjoyed reading it.

    for the industry stats, take a look at this piece: http://www.dnaindia.com/money/report_pre-paid-users-behind-bharti-price-move_1305948

    1. Ankit says

      @aman
      thanks a lot for sharing the data!! i guess i need to develop the habit of drilling the stats

  2. amit dhingra says

    Dear Ankit
    You seem to have a good grasp on the knowledge in Telecom. Tell me what impact it will have on service providers like us. With so many new players joining in, will it be good or bad for them.

    I am looking for 2 MN USD funding for one of my companies. how this scenario will impact that.
    Thanks
    Amit Dhingra
    [email protected]

    1. Ankit says

      @Amit

      To clarify, i have no grasp on telecom sector, for that matter any sector:) Just a normal guy who reads a lot and offers his 2 cents!!

      Infact, since u mentioned i think the apps/third party service providers have a lot to benefit. From what i understand, if you r into providing customer oriented services, this is am amazing oppurtunity.

      Cheaper calls – l mean more penetration and more usaeg. All the more reasons for reaching the masses.
      As from the telecom company providers perspective, with profit margins shrinking, i think VAS will be something that companies would be betting for.

      Pardon me but i dont see much on ur website to get a notion of what exactly you guys do!!

      Best of luck with the funding though…

  3. Sumedh says

    How about a plan where each successive minute costs less and less…first 5 mins will cost 1 Re…next 10 will be 50 paise and so on…that’ll encourage people to continue talking! ;)

  4. Dhananjay Nene says

    @ankit

    Tata DOCOMO has opened a Pandora’s Box

    Why pandora’s box ? What are the troubles ? Note the troubles should be expressed in some meaningful specific terms.

    It is estimated that the telecom industry can lose billions in revenue.

    Source, computations, logic etc. etc.

    Even with a little exaggeration, per second billing to me is as revolutionary as the invention of the telephone itself.

    Is it ? Why ? What is the variance between an ARPU or average revenue per call given per second billing vs pulse rate based billing.

    On Friday, Bharti Airtel gave a downbeat outlook due to a price war after posting its slowest pace of profit growth in at least six years, sending its shares down nearly 7 percent.

    With per second billing slated to decrease the operating margins, the profits are surely going to be hit, lest the ARPU’s see a dramatic increase.

    Speculative ? Is it not possible that ARPU can increase leading to increased net margin per user even if it leads to reduced margin per call ? The reader has no information to make an assessment even as the post doesn’t provide any.

  5. Ankit says

    @dhananjay This is by far the best feedback i have received for my writing :) Moreover, it is a weakness that i am vaguely aware of.Number crunching is something that i need to learn.Also, i tend to overwrite and hence there aint much space left for putting the data results.

    However, I would love to improve.Would be great to know if you could suggest what kind of data would have made it more meaningful. Eg: How much is the industry supposed to lose or something more than data.
    Eagerly await your feedback

  6. Dhananjay Nene says

    I think is an article with a great potential, let down by the lack of any substantial data to back up the assertions.

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