Last year was a tough year for the telecom industry. The new year will be challenging as well. Operators will need to run tight ships and focus on their core business to survive well.
The world was supposed to end in 2012. The Mayan calendar and theories around geometric reversal and planetary alignment, amongst others, were used to explain the end of civilization on December 21st. Well, cataclysmic and transformative events did occur, marking, perhaps, the beginning of a new era. Telecom industry got its share of transmogrification.
For years, the entire telecom industry benefitted from the rapid increase in the subscriber base.
Not so in 2012. The net addition in 2012 (until October) was 10 million compared with 141 million in 2011 and 227 million in 2010. This was partly because of clean up of inactive subscribers.
With subscriber penetration reaching 74% at the end of October 2012 (and 2G coverage expansion not at the heart of operator strategy), this lever of growth is becoming increasingly ineffective. Despite the multi-SIM phenomenon (2.2 SIMs per person, according to GSMA), subscriber net additions are on the decline, at least for now. Rural India (40% penetration vs urban penetration of 153%) provides opportunities but this is not easy picking.
The new subscriber acquisition norms, including verification formalities, add to the complexity and cost. Making number portability work and becoming a credible second SIM should be important levers of growth for some operators in 2013. Machine to machine (M2M) applications bring in a new category of ‘subscribers’ and may see some traction.
2012 also saw a decline in growth of the overall industry traffic/minutes. This combined with falling revenue per minute (RPM) (read, aggressive tariffs) led to sluggish growth in the industry wireless revenue. 3G/data uptake, although increasing, was slow. Low literacy levels and 3G device penetration are amongst the reasons cited for the slow uptake.
Here, I believe operators may have missed a trick and need to do more. While there is latent demand for data and non-voice services, much of the demand still needs to be created.
Low tariffs are no more the only driver. Relevant services and applications, availability of high speed data networks and data enabled devices (smart phones and feature phones) and an intuitive and friendly user experience need to be in place for data to take off. Through multiple interventions, operators can influence almost all these enablers and we may see this happening in