Customer retention, not new customers, an issue for Indian mobile operators

Peter Dinham
Monday, 19 December 2011 16:46

IT Industry - Market

The Indian mobile market is forecast to grow from 812 million connections by the end of this year to 1.36 billion in 2020, but it's not the increase in new subscribers, but the retention of existing customers, that one market analyst says should concern the country's mobile operators.

According to the latest report from Analysys Mason, of the forecast connections in 2020, 3G and 4G technologies are expected to account for 57.1 percent and 10.7 percent respectively, but unique mobile user penetration in India will only reach 54.0 percent in 2020, up from 34 percent in 2011, due to affordability constraints in rural areas.

The analyst firm makes that point that currently, 30 percent of SIMs in India's mobile market are inactive, which it says results in significant loss to operators, because insufficient revenue is generated as compared to the customer acquisition cost incurred.

'Therefore, operators need to shift their focus from customer acquisition to retention in order to optimise their spend on sales and distribution,' said Sourabh Kaushal, lead consultant at Analysys Mason.

'Operators need to understand the multiple-SIM phenomenon and inactivity drivers in emerging markets in order to evaluate their true revenue potential. The current market structure has resulted in a high proportion of multiple SIMs and inactive users, which camouflages the country's actual teledensity and makes it difficult to evaluate the market's true revenue opportunity,' Kaushal said.

And, according to Kunal Bajaj, director at Analysys Mason, with decreasing or flat voice ARPU, non-voice ARPU becomes critical for driving revenue growth. 'In order to drive adoption of value-added services, operators need to control the entire user experience throughout the customer lifecycle process. In addition, operators need to ensure user loyalty by tracking customer usage behaviour and suggesting possible upgrades or other relevant applications and services.'

Analysys Mason says that until next year, adoption of 3G services in India is expected to be limited, primarily because of costly 3G data plans and the high cost of entry for 3G enabled handsets. However, the firm says that from 2013, operators are expected to migrate 3G-capable handset users to 3G networks, resulting in high adoption of these services.

'Because of the focus on voice services and handset-based data connectivity, data-only SIMs account for only 1% of all SIMs. This is also limited because of the low penetration of mobile data devices such as laptops, netbooks and tablets, and the high cost of owning data-only SIMs and dongles,' says Pankaj Agrawal, Associate Director at Analysys Mason. 'However, with the increase in device-service bundling initiatives by operators and reduced data tariffs, the number of data-only SIMs is expected to grow to about 84 million in 2020, with growth accelerating after the launch of 4G services in 2013.'