Financial Daily from THE HINDU group of publications
Friday, Jul 16, 2004
Info-Tech - Telecommunications
Marketing - Strategy
Getting the `right mix' of customers
Mumbai , July 15
WHILE the wireless GSM operators are chasing their pre-paid customers, trying to bait them with many a juicy post-paid scheme, Reliance Infocomm the largest wireless CDMA player has been offering its customers a scheme for shifting to pre-paid services.
The current scene is seeing the GSM and CDMA players in the country charging down opposite lanes, as far as marketing their post-paid and prepaid segments goes, point out industry analysts.
Almost a year after Reliance Infocomm's celebrated Monsoon Hungama offer, the company offered the same customers an offer of a pre-paid scheme: the customer clears all his outstanding bills, in return the company waives the instalments on the customer's handset. The customer is now a prepaid one, retaining his number, his handset now his own and also now preloaded with free talktime of Rs 200.
"Every wireless operator is looking for an ideal mix of pre-paid and post-paid customers," said a telecom analyst with securities firm. "Pre-paid ones save you a lot of potential bad debts, and post-paid ones get you plumper revenues. By trial and error a player arrives at the right mix and the right customers in each segment."
The launch of prepaid services is a godsend to the CDMA operators.
Reliance Infocomm had to provision for bad debts worth Rs 436 crore for year 2003-2004, almost 16 per cent of its revenues for the year, at Rs 2,707 crore. While the figures for the other CDMA player Tata Teleservices are not available, the company, which had lost 15,000 players on both the fixed and mobile players in a single month recently (May 2004), accounted for it saying that it was clearing its base of defaulting customers.
Both these players had started off as 100 per cent post-paid ones.
Having aggressively priced and marketed their services, they were not very careful about their customers some of whom accounted for dreadful bad debts, compounded by billing and other logistical problems, officials of both companies privately admit.
For the GSM players, the TRAI quarterly report for Jan-March 2004 says it all.
Average revenue per user (monthly) from the post-paid segment was Rs 930 per month and for prepaid a mere Rs 277. "It is obvious which lane the players will charge down," said an analyst.
According to the report, the players appear to be actually succeeding, the prepaid component of their base was down from 77.7 per cent (as on December 31, 2003) to 75 per cent (March 31, 2004).
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