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Prepaid platforms are not an obstacle to profitability: Report

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VoicenData Bureau
New Update

A new study says operators will optimally position their prepaid models and choose strategies that have proven successful for the most profitable prepaid players.

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The report mentions that global giants-including Bharti, MTN, Vodafone Germany, Orange, Google, Grameenphone, Warid, and Telenor-suggests that there is more to the success of prepaid operators in developing markets than merely the popular adoption of a billing plan. It is the outcome of something larger-a comprehensive rethinking of what the mobile business model has historically been and how it has historically worked. This fits well for developing markets like India, Africa, Pakistan, and Bangladesh where a majority of the subscribers are 'chotta recharge' subscribers. In India about 95% of the total subscribers are prepaid.

According to the report, successful prepaid operators have scale. Because of the fluidity of the prepaid market and the high churn inherent in it, the ability to scale up quickly has become a critical part of profitability. The most profitable players generally have the largest networks and boast the widest distribution systems. They use their size to offer more flexible on-net pricing, using club strategies to attract and retain customers.

As for churn, they have above-average performance, using a variety of retention tools, from continuous demand stimulation to club-building through unique applications. In a context in which many customers move across networks or carry multiple subscriptions, the most profitable players manage to keep customers active on their networks for as long as possible. This trend in quite evident in India, where the multiple SIM usage is on an increase. The sales of dual SIM phones are growing at more than 100%. From a marginal 3% share of the overall market last year, dual SIM phones now account for nearly 15%, according to the latest data from ORG-GfK, a marketing and services solutions company. And now it is not about dual SIMs alone, manufacturers are planning to offer triple and even multi SIM handsets.

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The study further finds that the prepaid operators control the bulk of their traffic flow. The most profitable prepaid players generally control the entire infrastructure on which their traffic is running.

Interestingly, they have superb data performance, with a focus on content and connectivity. With voice revenue already slowing down, a strong performance on the data front can cushion the decline on the voice side and, optimally keep revenue growth stable.

They are competitive without being the cheapest. They use their size and scale to stay competitive on the pricing front and complement aggressive pricing with attractive brands, extensive distribution networks and other assets to drive up subscriber acquisition. Their cost-per-subscriber levels are two to three times lower than in more developed markets. Relative to operators in more developed economies, emerging market players spend less on staff (on an average) or base stations, says the report.

Emerging market operators also spend less on cost of sales per subscriber, thanks to the near absence of subsidies for prepaid customers. Most importantly, there is tremendous upside in prepaid mobile broadband, for a number of reasons. There are few customer-friendly alternative broadband offerings in many markets; 3G broadband solutions are less cumbersome and more flexible than the wireline alternatives, and mobile operators can bring to broadband the same brand of scale and marketing inventiveness they brought to basic voice services.

heenaj@cybermedia.co.in

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