Customers will force Airtel, Vodafone, Jio into battle for market share

There will likely be a spike in consumers switching across all mobile carriers, says Paul Moore

In a letter to the Telecom Regulatory Authority of India recently, Reliance Jio Infocomm accused Bharti Airtel of introducing discriminatory tariff plans in the marketplace and using misleading advertisements to promote its services. To many, it was nothing but round two of a bruising telecom battle that began when Reliance Jio entered the market nine months ago doing much the same that it now accuses competitors of doing: Undercutting rivals and offering freebies to consumers. 

While Jio had a free run till March this year notching up over 100 million subscribers in the process, experts say that sanity in terms of pricing and promotions will eventually prevail. But for the moment, the price and discount focused Indian customer is forcing brands into one of the biggest battles for market share.

 

“There will likely be a spike in consumers switching across all mobile carriers. As a result, they (mobile carriers or telecom operators) will be making quick reactive decisions based on the competitive scenario,” Paul Moore, director, global, Kantar Worldpanel ComTech, part of the WPP Group, said. “Mobile carriers will place more emphasis on products and services to add value and lock in users,” he says. 

Kantar Worldpanel ComTech is the largest continuous consumer research mobile phone tracking panel in the world and India is the nineteenth addition to the list of markets tracked, indicating its importance, Moore says. Most telecom majors are already beginning to indulge in reactive decisions, offering tariff plans based on lifestyle, usage, occupation, gender and age. The spending pattern of subscribers has come sharply into focus, he says, as most players determine which plan will suit the consumer’s need. 

There is a reason why telcos in India are doing this, he says. Average monthly spend on mobile services is lowest in India vis-a-vis the Comtech panel’s other markets, which includes the US, UK, Brazil, Spain, Argentina, Russia, Germany, Italy, France, Australia, China and Japan.  

Moore says India’s average monthly spend stands at merely $2.5 or Rs 161 based on the current exchange rate ($1 = Rs 64.55). Compare this with China’s average monthly spend and it stands at $8.7 or Rs 562, Brazil’s $7.6 or Rs 491 and Mexico’s $10.7 or Rs 691. 

Also, India remains a largely pre-pay market at 92.5 per cent versus the UK’s 17.7 per cent and US’s 31.3 per cent, according to the report, driving down the ability to derive significant revenue from subscribers. What’s more? Despite India being the world’s second-largest smartphone market after China, smartphone penetration is actually lower than many other markets including the US, UK, China, Brazil and Mexico.

Moore says that India’s smartphone penetration in 18 out of 22 telecom circles surveyed by the research agency as part of its 20,000-strong Comtech consumer panel stands at 46.5 per cent, the balance 53.5 per cent belongs to feature phones. Countries such as the UK are miles ahead, with smartphone penetration at 87.2 per cent, the US with 75.1 per cent and China, 79.3 per cent. Developing markets such as Brazil and Mexico too are better off with smartphone penetration at 68.1 per cent and 68.8 per cent respectively.

Clearly, despite all the potential that India displays in the telecom and smartphone market, incumbents in both domains, say experts, have much work to do to convert this potential into a viable business proposition. While there are signs of improvement: The Rs 16,000 and above handset models in India have reported good growth in recent quarters, average spend on a handset in the country, according to the Kantar Worldpanel Comtech, is only $109 or Rs 7,042, which is less than half the Rs 16,000-price point. This means that most handset buyers in India still prefer lower-priced models as opposed to higher-priced ones, putting pressure on existing brands to help consumers trade up, experts tracking the mobile phone market said.

Most smartphone brands from Apple to Samsung, LG to Lenovo are responding to this challenge by focusing on pricing across the value chain. While Apple in particular continues to see good traction for its premium products, thanks in part to the huge brand equity it enjoys in the marketplace, the company has turned its attention to lower-priced models too to improve shares. In recent quarters, the world’s most-admired tech brand has dropped prices of older models, offered discounts on newer upgrades and is also readying plans to introduce locally assembled iphones in India in a month. 

Rival Samsung, on the other hand, is plugging gaps in its portfolio, both at the upper and lower ends, to ensure competitors do not shake it off its pedestal of being the leader in the 113-million-unit domestic smartphone market. Currently, Samsung is the leader in the domestic smartphone market with a share of 26 per cent for the March 2017 quarter in terms of shipments, according to a study by Counterpoint Research. It has a tough and gruelling road ahead as it will need to run harder to keep its spot in the sun.