Call of the Mass Markets: The Indian Cell Phone Industry∗
S. Ramesh Kumar and Radhika Vishvas
Concepts assoicated with the case: Positioning of services, perception, brand loyalty, profitability of segments.
Conversations in the Mass Market: The Cellular Phone Services in an Emerging Market (Indian Context)
The digital economy ushered in during the early part of the nineties has transformed the life of a cross section of the population in the Indian context. Western lifestyles, greater purchasing power, enhanced aspirations and greater appreciation of the self-concept are some of the marked changes that have been observed in recent times. While there have been several electronic products that have penetrated fast in the Indian market, the exponential growth of cellular services across the country cutting through socioeconomic classes has been amazing and unprecedented. The introduction of handsets to suit the context by brands like Nokia at low prices, the lowest mobile tariffs in the world, functional utility and the novelty of having this conspicuous product as a lifestyle symbol, are some of the salient reasons that probably explain the diffusion of cellular services in the country. This caselet provides the backdrop of competition among several cellular service brands, some data about a specific brand of mobile and an opinion survey about the usage of cellular services among various segments of consumers conducted by the authors. The caselet’s objective is to conceptually reason out how a new brand of cellular phone services could enter the Indian context in the scenario portrayed.
Introduction to India
The distinguishing features of Indian economy are given below:
- India’s brisk economic growth rate—the GDP grew by 6.9 per cent in 2004–2005 with an average annual growth rate of 5.9 per cent during the five-year period of 2000–05
- GDP at PPP is $ 3,319 bllion when contrasted with Asia
- GDP per capita at PPP is $3,100 billion when contrasted with Asia
- India has one of the highest savings rate in the world with Rs 29 of every Rs 100 of its national income being saved.
- Exports $63.97 billion (2003–′04)
- Imports $78.25 billion (2003–′04)
- Forex reserves $107.44 billion (2003–04)
- Inflation (per cent change in WPI) at 5.5 per cent.
- Fertility rate 3.1 per cent
- Infant mortality rate 67 per 1000 births.
- Adult literacy rate 57 per cent
- Average life expectancy of an Indian is 61 years
- Dependency ratio accounting to 62 per cent
- Population above 60 years is around 7.7 per cent
- 20 million middle class homes in rural India equal the number in urban India and thus have the same buying power.
India is a Union of States. It is a Sovereign Socialist Democratic Republic with a parliamentary system of government. The Republic is governed under the framework of the Constitution of India, which was adopted by the Constituent Assembly on 26th November 1949 and came into force on 26th January 1950. There are 29 States and 6 Union Territories in the country. The President, through an administrator appointed by him, administers Union Territories. From the largest to the smallest, each State/Union Territory of India has a unique demography, history and culture, dress, festivals, and language. India, with its total population of 1,028,610,328 (Census 2001)1 holds a vast potential for marketers. India is undoubtedly a young country, with a staggering 400 million youth in the age group of 0–19 (i.e 54 per cent of India’s population is below 25 years and 80 percent are below the age of 45), expecting to join the work pool in next two decades. This is a great asset for emerging India.
Liberalization of Cellular Services
With the advent of GSM in the nineties two mobile licenses were issued per circle. The licenses were however dogged by ineffective government regulations, resulting in high consumer pricing (RaboCom, 2004 (I))2. In July 1992, the Government of India (GoI) invited private participation in providing cellular mobile services (Cellular services in India conform to the digital global system for mobile communications (GSM) standard (900 MHz spectrum)) in the country. Initially, a duopoly model of competition was adopted for each service area.
The award of cellular service licenses was planned in two phases through a competitive bidding process. Cellular licenses were issued first to eight operators for the four metros–Delhi, Mumbai, Kolkata and Chennai-in the first phase during 1994. The license for the four metros became effective from November 1994. In the second phase, cellular service licenses were to be issued for 20 circles. The telecom circles were categorized as A, B and C, in accordance with their status of telephony and potential (ICRA 2001)3.
After a competitive bidding process, 34 additional licenses (besides the eight in the first round) were issued in 18 State Circles (Andaman and Nicobar islands and Jammu & Kashmir did not receive any bids; West Bengal and Assam received only one bid each). The license for most of the Circle operations came into force from December 1995 (The licenses for cellular services are for a period of 20 years, further extendable by 10 years at one time.)
Cellular services (Cellular network local and intra-Circle (within a circle) long distance services), were introduced in India on a commercial basis in the four metros during 1995. This was followed by the launch of services in Circles during 1996–1998.
In addition to the existing two operators, the state-owned/controlled operators–DoT (The GoI holds 100 per cent equity stake in BSNL and 56.25 per cent stake in MTNL) DTS, BSNL and Mahanagar Telephone Nigam Limited (MTNL) reserve the right to be the third operator in each of the licensed service areas (cellular services across the country, except in MTNL licensed areas of Delhi and Mumbai). MTNL commenced its cellular services during FY2001, while BSNL launched its services in FY2002.
During 2001, the GoI also invited bids for the award of licenses to the fourth operator for cellular services in the four metros and telecom circles, besides for the filling up of the existing slots of Andaman and Nicobar Islands and West Bengal. In August 2001, after a “multistage ascending bid” process, the Government of India issued letters of intent (LoIs) to the successful bidding companies, following their payment of the entry fees of Rs. 16.34 billion. Because of 2001 deregulation of mobile, fixed-line and long distance sectors spurred growth and allowed many new players to enter the market.
The regulatory norms introduced by the telephone regulatory authority of India (TRAI) had a significant impact on the long distance call charges, reducing them by as much as 80 per cent in just one year. It reduced the disparity between tariffs of wire line and wireless services from a factor of 15 to 3. However, the single most important catalyst that transformed the Indian telecom industry was the WLL controversy which began in November, 2000 when TRAI proposed that basic service operators (BSOs) should be allowed to use cellular technology. Mobile calling on the WLL licenses was restricted to relevant short distance calling areas (SDCAs). However, the BSOs exploited a loophole in the license and offered full mobility services by using call forwarding and multiple number registrations. As a result, the GSM based operators who had paid a significant license fee (2.5 billion dollars) contested this decision. This legal battle continued for three years and was finally resolved when the government introduced unified licensing, making cellular services technology neutral and allowing WLL players to provide full mobility after payment of an entry fee equal to what the GSM operators had paid (RaboCom, 2004(2))4. Unified Licensing reduced the regulatory uncertainty prevailing in the Indian telecom industry and provided a level playing field for all the major mobile service providers. (R. C. Natarajan, 2006)5.
An Overview of Socio-Economic Classification of India
The reality as reflected by numbers—Cellular services industry
The following tables provide important information on the cellular phone industry.
According to Indian market demographic report 2002, NCAER, the socio economic classifications of India that are based on income ranges (in INR) per annum and durable product possessions of households divides the population into several categories of households. This basic demographic and possession-based segmentation explains to some extent the lifestyle of the respective category of households. (Refer Table A in Appendix 2) (NCAER, 2003)6
Indian mobile services sector
The cell phone services in India have grown by leaps and bounds since the turn of the century. Competition is fierce and companies adopt various practices to attract consumers and retain them. Indian telecommunications industry has entered the age of deregulated market competition from one of regulated monopoly enjoyed by the department of telecommunication (DoT). In July 1992, the Government of India (GoI) invited private participation in providing cellular mobile services in the country. Initially, a duopoly (that is a maximum of two cellular mobile operators could be licensed in each telecom circle) model of competition was adopted, under a fixed license fee regime, and for a license period of 10 years in each service area.
The initial response of the private sector was very encouraging. The attractiveness of the Indian market due to its low tele-density, high latent demand and burgeoning middle class, brought in some of the largest global telecom players, foreign institutional investors and major Indian companies to invest in telecom, especially in the Indian cellular industry. In 1992, India invited private sector participation in the telecom industry. The regulatory authority was set up in 1997 and the tariff rebalancing exercise commenced in 1999, and is still far from complete. By March 2002, the cellular industry had 42 networks on air, serving 1400 towns and cities; also covering thousands of villages and serving nearly 6.5 million subscribers across the country (Contemporary concerns study 2002–2004, IIMB)7.
This industry is growing at an average rate of 85 per cent per annum, by providing quality service and widely accepted international standards to its subscribers. In fact, as per industry data, the Indian cellular sector has registered a compound annual growth rate (CAGR) of 109 per cent in cellular subscribers during the period 1998–2003. In the beginning of 2005, there were 48.5 million mobile users, and just within a span of eleven months 71 million people had subscribed to cellular services in India—including both global system mobile (GSM) and code division multiple access (CDMA) users.
Today, there are nearly 129.5 million cellular mobile subscribers in India and 13 percent of Indians have mobile services. (Surendra T., 2007)8. It is noticed that the tele-density is growing at 2.5 per cent annually i.e., almost 25 million new subscribers are getting telephone connections every year, making India, one of the most exciting telecom markets in the world (The Marketing White Book, 2006)9.
According to a review of tariff statistics available from the International Telecom Union (ITU), Electro Magnetic Compatibility (EMC), renowned telecom consultants, the mobile telephony tariffs in India are the lowest in the world. EMC shows that India at $16 per month has the lowest monthly cost of a 300-minute basket for cellular services. In contrast, a 300-minute basket costs $21 in China, $29 in Thailand, $40 in Malaysia and $ 42 in Indonesia. The tariffs in South American economies are far higher at $60 for Chile, $77 for Brazil, $96 for Mexico and $115 for Argentina (Contemporary concerns study 2002–2004, IIMB)7.
Despite the highest regulatory costs in the world, Indian operators are offering these low tariffs. Indian cellular operators are passing 35–42 per cent of their revenues to the government by way of various levies—license fees (8–12 per cent), spectrum usage charges (2.5–4.4 per cent), service tax (5 percent) and interconnect access charges (approximately 20 per cent of revenues) (Contemporary concerns study 2002–2004, IIMB)7. In contrast, cellular operators in China pay no license fee, a negligible fixed usage charge for spectrum, no service tax and have very reasonable terms of interconnection with the fixed service operators.
Cellular service technologies in India
The mobile industry in India is divided between the two technologies—GSM and CDMA. While the earlier service providers had adopted the GSM technology, the new players have been using CDMA technology and have notched up a significant share of the Indian market.
The cellular technologies are normally evaluated on the following three parameters namely the data transmission capacity, security and radiation levels (Refer Table E in Annexure 2)10
Global system for mobile communications (GSM) is a form of multiplexing, which divides the available bandwidth among the different channels. GSM is a combination of time-and frequency-division multiple access (TDMA/FDMA). The FDMA part involves the division by frequency of the (maximum) 25 MHz bandwidth into 124 carrier frequencies spaced 200 kHz apart. Each of these carrier frequencies is then divided in time, using a TDMA scheme. The fundamental unit of time in this TDMA scheme is called a burst period and it lasts 15/26 ms (or approximately 0.577 ms). Eight burst periods are grouped into a TDMA frame (120/26 ms, or approximately 4.615 ms), which forms the basic unit for the definition of logical channels. One physical channel is one burst period per TDMA frame. Thus GSM allows eight simultaneous calls on the same radio frequency
Code division multiple access (CDMA) is a form of multiplexing (access to the same resource will be given to more than one user), which allows the use of a particular frequency for a number of signals, optimizing the use of available bandwidth. It is a cellular technology that uses spread-spectrum techniques. In CDMA technology every channel uses the full available spectrum. Individual conversations are encoded with a pseudo-random digital sequence. CDMA employs analog-to-digital conversion (ADC) in combination with spread-spectrum technology. Audio input is first digitized (ADC) into binary elements. The frequency of the transmitted signal is then made to vary according to a defined pattern (code), so that it can be intercepted only by a receiver whose frequency response is programmed with the same code. Hence, the receive frequency follows along with the exact transmitter frequency. There are trillions of possible frequency-sequencing codes; this enhances privacy and makes cloning difficult. The technology is used in ultra-high-frequency (UHF) cellular telephone systems in the 800 MHz and 1.9 GHz bands.
Advantages of CDMA over GSM
Since bandwidth is the major problem in the modern times the CDMA has a very clear advantage over the GSM in these terms:
- The number of channels (users) that can be allocated in a given bandwidth is comparatively higher for CDMA than for GSM.
- In CDMA there are trillions of possible frequency-sequencing codes; this enhances privacy and makes cloning difficult.
- Also, the cost of setting up a CDMA network is comparatively less than that for the GSM network.
- As far as radiation level concerned, CDMA is the most harmless among all existing technologies. Even though, it transmits microwaves while on the standby mode, as other technologies do, CDMA technology checks its transmission level 800 times per second. Therefore, the radiation level in CDMA is 10 times less than that in GSM. Another important thing to point out is that CDMA system transmits signals only when the user starts conversation. Simply saying, when the receiver is listening to conversation at the other end he/she are not affected by microwave as the speaking person does.
Due to these advantages there is high probability that CDMA technology will dominate the future of mobile communications.
Common Features of Both the Technologies
Multimedia messages, video, high-speed Internet access, digital camera and even PDA function are some of the common features that can be found in both technologies11.
Indian Telecom—A Snapshot
Indian telecom industry is one of the fastest wireless markets in the world. The compound annual growth rate (CAGR) from March 1999–2006 for the mobile service providers is 85 percent in comparison with the CAGR for fixed-line service providers, which is just 13 percent, indicating mobile service overtaking the fixed-line subscriber base (Contemporary concerns study 2002–2004,IIMB)7in the given period. Table B in Appendix 2 gives the total Indian telecom service providers’ subscriber database of March 2006
Subscriber base—Indian telecom service providers
According to TRAI press release and AUSPI & COAI, March 31st 2006 data, there is nearly 4.6 and 8.3 percentage of penetration per population of fixed line and wireless subscribers respectively, with an increasing private player participation in the telecom service providers sector (refer Table B in Appendix 2)
Indian Mobile Service Providers—A Competitive Scenario
The various major aspects of competition among the cellular service brands that include type of technology, the circles or geographical zones involved and market share are shown in Table C, Appendix 2.
Key Mobile Service Providers of India Bharti Airtel
Bharti Airtel Limited is one of India’s leading private sector providers of telecommunications services with an aggregate of 39 million customers as at the end of March′07, consisting of 37.14 million mobile customers. Bharti Airtel has been rated among the 10 best performing companies in the world in the BusinessWeek IT 100 list (Results presentation for the fourth quarter and full year ended, 2006)12
Bharti Airtel is structured into three strategic business units—mobile services, broadband and telephone (B&T) services and enterprise services. The mobile business provides mobile and fixed wireless services using GSM technology across 23 telecom circles. The B&T business provides broadband and telephone services in 94 cities. The enterprise services provide end-to-end telecom solutions to corporate customers and national and international long distance services to carriers. All these services are provided under the Airtel brand. Airtel’s high-speed optic fibre network currently spans over 40,000 kms covering all the major cities in the country. The company has two international landing stations in Chennai that connects two submarine cable systems—i2i to Singapore and SEA-ME-WE-4 to Europe13. The company provides reliable end-to-end data and enterprise services to corporate customers by leveraging its nationwide fiber optic backbone, last mile connectivity in fixed-line and mobile circles, VSATs, ISP and international bandwidth access through the gateways and landing stations.
Vodafone Infrastructure Sharing MOU with Bharti
Vodafone has granted the Bharti group company an option, subject to completion of the Hutch Essar acquisition; to buy its 5.6 percent listed direct interest in Bharti for US$1.6 billion (£0.8 billion) which compares with the acquisition price of US$0.8 billion (£0.5 billion)14
Bharti’s Unified Brand Strategy
Bharti Tele-Ventures, one of India’s leading telecom conglomerates unveiled a unified brand strategy for all telecom services, with Airtel as the flagship brand on 15th September 2004.
Under the new brand architecture, Bharti’s telecom services are being clubbed under four heads:
- Airtel mobile services—Mobile services
- Airtel telephone and broadband services—Fixed line services and broad band solutions
- Airtel song distance services—Long distance service (ILD & NLD)
- Airtel enterprise services—Single window end-to-end telecom solution for large corporations15.
Hutch is the brand name of Hutchison Essar. It established its presence in India in 1994 and was one of the first cellular providers in the city of Mumbai. Over time it has expanded operations across the country and is one of the most respected cellular service providers known for providing world class and innovative services.
Hutch established its presence in India in 1994 by acquiring the cellular license for Mumbai. It now has operations in 16 circles (covering the respective geographical areas) that account for 70percent of India’s mobile subscriber base.
Hutchison Essar Limited, with about 18.4 million subscribers, is one of the most reputed telecom companies in India. Hutchison Telecom is a part of the multinational conglomerate—Hutchison Whampoa that has its origins dating back to 1828 in Hong Kong. The Group operates five core businesses in 42 countries across the world, of which, Hutchison Telecom has been one of the pioneers in mobile multimedia communication and spans five continents. The Essar Group is one of India’s largest corporate houses with interests spanning the manufacturing and service sectors like steel, oil and gas, power, telecom and BPO, shipping & logistics and engineering & constructions. The Group has an asset base of over Rs 20 billion (US$ 4.4 billion) and employs over 4000 people16
Vodafone Acquiring Hutchison Essar in India
Vodafone announced on 11th February 2007 that it has agreed to acquire a controlling interest in Hutchison Essar Limited (“Hutch Essar”), for an enterprise value of US$18.8 billion (£9.6 billion) for Hutch Essar. Vodafone has agreed to acquire companies that control a 67percent interest in Hutch Essar from Hutchison Telecom International Limited (“HTIL”) for a cash consideration of US$11.1 billion (£5.7 billion) (Charles Assisi, 2007)17.
Reliance Infocom Ltd
Promoted by Reliance Industries Limited, Reliance Infocom Ltd offers mobile telephony services on the CDMA platform on a nation wide optical fiber Consumer Behaviour and Branding cable network capable of supporting broadband services. Its strategy has been to acquire a large subscriber base backed by low tariffs, and then to promote calls within its network to enable yet lower tariffs for its subscribers. Reliance Infocom is building a vast broadband network and Internet protocol (IP) backbone, connecting India’s top 582 cities with more than 60,000 route kilometers of fiber that will offer terabit capacity. Once this network is complete, Reliance will offer customers a full range of services including national coverage, fixed line, mobile, national long distance, and international long distance, as well as a full offering of data, image, and value-added services18.
Tata Teleservices Ltd
Tata Teleservices is part of the US$17.8 billion Tata Group that has over 90 companies, over 220,000 employees and more than 2.8 million shareholders. With a committed investment of US$ 7.5 billion in Telecom (FY 2006), the Group has a formidable presence across the telecom value chain. Tata Teleservices spearhead the Group’s presence in the telecom sector. Incorporated in 1996, Tata Teleservices was the first to launch CDMA mobile services in India, in the Andhra Pradesh circle. Tata with its acquisition of Hughes Telecom (India) Limited (now renamed Tata Teleservices (Maharashtra) Limited) in December 2002, swung into expansion mode. Tata Tele services operates in 20 circles i.e., Andhra Pradesh, Chennai, Gujarat, Karnataka, Delhi, Maharashtra, Mumbai, Tamil Nadu, Orissa, Bihar, Rajasthan, Punjab, Haryana, Himachal Pradesh, Uttar Pradesh (E), Uttar Pradesh (W), Kerala, Kolkata, Madhya Pradesh and West Bengal. Tata Teleservices has established a robust and reliable telecom infrastructure that ensures quality in its services. It has partnered with Motorola, Ericsson, Lucent and ECI Telecom for the deployment of a reliable, technologically advanced network.
The company, which heralded convergence technologies in the Indian telecom sector, is today the market leader in the fixed wireless telephony market with a total customer base of over 3.7 million. Tata Teleservice’ bouquet of telephony services includes mobile services, wireless desktop phones, public booth telephony, and wire line services. Other services include value added services like voice portal, roaming, post-paid Internet services, 3-way conferencing, group calling, Wi-Fi Internet services and data services. Tata Teleservices has marked its entry into the prepaid segment by launching “True Paid”, across all its existing 20 circles. Tata Indicom has also launched a collection of 1000 mobile games—one of the largest collections of mobile games in the world
Tata Indicom has redefined the existing prepaid mobile market in India by unveiling their new offering—Tata Indicom “Non Stop Mobile” and “Don’t Stop Mobile”, which allow customers to receive and make free incoming and outgoing calls. Introduced in India for the first time, the new “Non Stop Mobile” and “Don’t Stop Mobile” are targeted towards the vast masses of India. Tata Teleservices has a strong workforce of 6000. In addition, TTSL has created more than 20,000 jobs, which include 10,000 indirect jobs through outsourcing of its manpower needs. Today, Tata Teleservices Limited along with its subsidiary Tata Teleservices (Maharashtra) Limited serves 10 million customers in over 2700 towns. With an ambitious rollout plan both within existing circles and across new circles, Tata Teleservices is offering world-class technology and user-friendly services in 20 circles19.
Bharat Sanchar Nigam Limited (BSNL)
Bharat Sanchar Nigam Ltd, formed in October, 2000, is the world’s seventh largest telecommunications company providing comprehensive range of telecom services in India: wireline, CDMA mobile, GSM mobile, Internet, broadband, carrier service, MPLS–VPN, VSAT, VoIP services, IN services etc. Within a span of five years it has become one of the largest public sector units in India.
BSNL has installed Quality Telecom Network in the country and is now focusing on improving it, expanding the network, introducing new telecom services with ICT applications in villages, and wining customer’s confidence. It has about 47.3 million line basic telephone capacity, 4 million WLL capacity, 20.1 million GSM capacity, more than 37,382 fixed exchanges, 18000 BTS, 287 satellite stations, 480196 Rkm of OFC Cable, 63730 Rkm of microwave network connecting 602 districts, 7330 cities/towns and 550,000 villages. BSNL is the only service provider, making focused efforts and planned initiatives to bridge the rural-urban digital divide ICT sector. In fact there is no telecom operator in the country to beat its reach with its wide network giving services in every nook and corner of the country and operates across India except in Delhi and Mumbai.
BSNL is the number one operator of India in all services in its license area. The company offers wide ranging and most transparent tariff schemes designed to suit every customer.
BSNL cellular service, CellOne, has more than 17.8 million cellular customers, garnering 24 per cent of all mobile users as its subscribers. This means that almost every fourth mobile user in the country has a BSNL connection. In basic services, BSNL is miles ahead of its rivals, with 35.1 million basic phone subscribers i.e., 85 per cent share of the subscriber base and 92 per cent share in revenue terms.
BSNL has more than 2.5 million WLL subscribers and 2.5 million Internet customers who access Internet through various modes viz. Dial-up, leased line, DIAS, and acount-less Internet (CLI). BSNL has been adjudged as the Number One ISP in the country.
BSNL has set up a world-class multi-gigabit, multi-protocol convergent IP infrastructure that provides convergent services like voice, data and video through the same backbone and broadband access Network. At present there are 0.6 million DataOne broadband customers. The company has vast experience in planning, installation, network integration and maintenance of switching and transmission networks, and also has a world class ISO 9000 certified telecom training institute. Scaling new heights of success, the present turnover of BSNL is more than US $ 8 billion with net profit to the tune of US $ 2.26 billion for last financial year. The infrastructure asset on telephone alone is worth about US $ 14.37 billion. The turnover, nationwide coverage, reaches, comprehensive range of telecom services and the desire to excel has made BSNL the No. 1 Telecom Company of India20.
Spice Telecom, the brand name of Spice Communications Private Limited is presently operating cellular phone services in the states of Punjab and Karnataka. Considered as one of the best service providers of mobile telephony in India, Spice Telecom is the flagship company of MCorp Global, a pioneer in introducing cellular mobile telephone services in India; and having business interests in the fields of information, communication and entertainment (ICE).
Spice is trying to enable re-engineering of its existing businesses for greater competitiveness through building new strategic partnerships both in India and overseas. Telekom Malaysia Berhad (TM) has 49 percent stake in Spice Communications Private Limited (Spice) through TM’s international investment holding company, TM International Sdn Bhd (TMI). The remaining 51 percent is with Mcorp Global Ltd and its associates (Mcorp)21.
The following are the implications of a rapidly growing mobile industry with brands like Airtel and Vodafone.
- Given the large potential for mobile phones in India, brands will be required to enlarge the base of consumers. This is evident from the various sales promotional offers of brands at the lower end of the market.
- In order to compete with a major brand like Airtel, brands need to effectively market value added services like short message services (SMS) and music downloads. Given the large youth population in the country is vital to brands. Acquiring and retaining consumers who use value added services will be an important strategy for brands.
- Brand positioning to attract the youth segment will be important to brands.
Mapping Competition in the Mobile Phone Market—Positioning Maps
Positioning Map 1 Price Vs Service
Note: The authors have used the number and variety of services to plot the perceptual map. The prices of services have been obtained from the retailers.
Positioning Map 2 Price Vs Life Style as Symbol
Note: The brands are positioned on lifestyle as symbol at the authors discretion based on their exposure to the advertisements of brands
Data of a Cellular Service Brand–Mass Mobile∗
The brand “Mass Mobile” has got a consumer base of 7,00,000 and 70,000 in prepaid and post paid services respectively. Its main stream of total revenue flowing from its value added services accrue to a blended (Pre-and Post-paid) 14 per cent of the total revenue. This service provider is showing an increase in consumer base by nearly 70,000 and 2,500 consumers joining in prepaid and postpaid services respectively every month. The churn rate as well as the consumer usage pattern and costs involved with regard to overheads are shown in Table D in Appendix 2.
Percentage of Customer segment associated with Mass Mobile
After studying the four different respondent groups and interacting with the leading brand Mass Mobile phone service provider, it is clear that 50 per cent (prepaid + post-paid) of business class/professional class users are the major subscriber base. This is followed by the youth/students segment, which used nearly 30 per cent services and the private employment group that makes up 13 per cent user of both pre-and post-paid services. The Government employment user group is the least user with only 7 per cent consumer base using both the services (refer Table 1 in Appendix 2)
Opinion Survey Among cellular Service Users:
A questionnaire designed to elicit responses from four major segments of users (as defined in the case) was used. The four segments consist of Private Employment, Youths/Students, Businessman/professionals, and Government employment. Seventy-five respondents were randomly selected from each of the segments and responses were obtained.
Note: Full questionnaire is provided in Appendix 1.
Results of the survey associated with Mass Mobile
Tables 2–5 in Appendix 2 represent the results of the survey conducted on the four groups of the consumer base—Private Employment, Youth/Student, Businessman/Professionals and Government Employment subscribers. The tables provide information on several aspects of mobile services purchase and usage.
Question for discussion:
- In the event of the service category being opened up for a new brand (either through foreign direct investment or an Indian business group attempting one) how should it enter the Indian cellular service market?
- How can the impact of brand loyalty and brand switching be explained in such a huge base of consumers, even though the prices of mobile services are lowest in the world?
Note: The teaching note for this case is available with the author. Instructors discussing this case may contact him at email@example.com and receive the note on sending the details of their affiliation.
Appendix 1: Questionnaire
Please fill up this questionnaire. This will be used only for academic purposes. The information you provide will be kept confidential. So kindly find few minutes to complete this questionnaire and help us in our survey (Please mark ‘∗’ in front of your correct answer, save it and send it back at the earliest)
- Which of the following do you feel serves the best use for your mobile
- Contacting family members
- Business purpose
- Social interaction
- Any other please specify
- Do you feel that the services provided by different service providers in general are good?
- Do you think maintaining a mobile is expensive?
- Do you perceive, you will require all services provided by mobile service providers?
- Do you think there is transparency (you are able to completely understand) in the services provided by the various brands of mobile service providers?
- Do you feel that there should be good loyalty schemes offered by mobile service providers (better than what they offer currently)?
- Do you feel that light users and heavy users are being treated alike (from the view point of pricing of services) currently?
- Do you think there is an unwanted hype and “Noise” about various services offered by mobile service providers?
- Do you understand all the value added services offered by your mobile phone operator
- Do you feel that people use mobile services as a status/fashion symbol also?
- Do you use the mobile for value added services, other then using it for communication purposes?
|Sex||• Male||• Female|
|Martial Status:||• Married||• Bachelor|
|• Youth/Student||• Employed/Professionals|
|• Businessman||• Government Employees|
Appendix 2: Tables Used in Mass Mobile Case Study
Table A An overview of Socio-economic classification of India The reality as reflected by numbers Cellular services industry
Source: Indian market demographic report 2002, NCAER.
INR=Indian Rupees, INR 45= US $1.
Table B Subscriber base-Indian telecom service providers
Source: TRAI press release dated April 10, 2006 and AUSPI & COAI data as of March 31, 2006. Accessed on 22nd September 2006.
Table C Indian Mobile service providers—A competitive scenario
Source: AUSPI and COAI data as of March 31, 200622
Accessed on 22nd September 2006.
Table D Data of a cellular service brand Mass Mobile
Table E Cellular service technologies in India Data transmission of different technologies
|Cellular technology||Generation||Data transmission capacity|
|CDMA (IS-95B)||2.5G||64 Kps–140 Kps|
|CDMA 2000||3G||2 MBps|
Table 1 Percentage of Customer segment associated with Mass Mobile
Source: The respective percentage has been obtained from the authors’ interaction with a leading brand of mobile phone services.
Table 2 Results from Survey Private Employment sector
Table 3 Youth/Students
Table 4 Businessman/Professionals
Table 5 Government Employment:
Note: Tables from 2 to 5 gives the customer responses for various aspects of mobile service usage.
1. Indian Statistical hand book Census (2001)
2. RaboCom. 2004(1), Vol.9, Spring, p.12
3. ICRA (2001) Information services, December 2001, “The Indian Telecommunication Sector, Cellular services in India”, Sourced from Library of Indian Institute of Management, Bangalore, E-20292.
4. RaboCom. 2004(2), Vol.9, Spring, p.13
5. R.C. Natarajan (2006) and Students group 2004–2006, “Mobile Telephony and Youth’s Perception”, TAPMI, Sourced from: IIMB Library, MD/NBM Section, E-26791 Ind
6. NCAER (2003), Indian market demographics report 2002, IIMB Acc. No. 67038, 21st October.
7. Contemporary concerns study (2002–04) “Diffusion of Mobile Telephony”, PGP 2002–2004, unpublished report sourced from library of Indian Institute of Management, Bangalore.
8. Surendra T. (2007), “Your phone bill will pay for the acquisitions”, Times of India, 13th February
9. The Marketing White Book (2006), Business World, Telecom, Pg.No.255
12. “Results presentation for the fourth quarter and full year ended March 31, 2006”, New Delhi, April 28, 2006, www.bhartiairtel.in, PPT Slide No: 5
15. www.bhartiairtel.in/48.html, Category: FY2004–2005 15–09–04 “Bharti heralds the beginning of a unified era in the Indian Telecom Industry”
17. Charles Assisi (2007), “Why Vodafone paid $18.8bn to enter India”, Times of India 13th February
22. TRAI (Telephone Regulatory Authority of India) press release dated April 10, 2006, AUSPI(Association of Unified Telecom Service Providers of India) and COAI (Cellular Operators Association of India) data as of March 31, 2006