Bundled Services Litmus Test For Telcos In 2019

After two years of intense competition and rock-bottom tariffs, which changed the pecking order in India’s telecom sector and left just three operators to compete, the real battle to retain subscribers has just begun and bundled offerings are set to be the first arrows drawn from the quiver.

With the mobile subscriber base reaching its peak and revenue from selling SIMs plunging after the entry of Reliance Jio in September 2016, operators are now looking at bundling other services to increase consumer stickiness in a hyper-competitive market and boost their top-lines. Vodafone Idea Ltd, India’s largest telecom operator by users and revenue market share, posted a ₹4,970 crore loss in the September quarter while Bharti Airtel saw profit shrink 65% from a year earlier to ₹118 crore. Reliance Jio made a profit of ₹681 crore in the same period.

After disrupting the wireless business, new entrant Reliance Jio is now betting on its latest offering Jio GigaFiber, through which it aims to reach 50 million users by connecting homes, merchants, small and medium enterprises and large enterprises. The company expects fiber-based connectivity to enable solutions such as multi-party video-conferencing, voice-activated virtual assistants, digital shopping and smart-home solutions, Reliance Industries Ltd chairman Mukesh Ambani said in July. The commercial launch and pricing plans of GigaFiber are awaited.

The ‘quadplay package’, as it is popularly known, bundles a wired broadband connection, landline, mobile phone, and content together sold by a single service provider who offers this through a fiber duct that enters your home. This model is popular in the US and parts of Europe where a single operator offers these gamut of services.

Airtel also plans to build a digital platform, Airtel Homes Platform, wherein it will offer bundled services with an integrated bill with discounts to consumers who buy all three products—broadband, DTH, SIM card – together, Mint had reported on 4 December. Airtel is piloting this offering in Andhra Pradesh and the platform will offer not only products from Airtel’s stable, but also ancillary services such as home security and surveillance available through a third-party vendor.

“In India, bundling could work well if targeted at the top end of the subscriber base, but the telcos will need to offer more than just the traditional quad-play proposition. They should explore value-added services such as home automation and home security. There has to be a definitive product road-map to increase consumer interest and value from bundling. Of course, this would mean enhancing infrastructure and the ecosystem, which are weak for such propositions,” said Amresh Nandan, vice president and analyst (tech industry), Gartner.

Operators have taken the first step by bundling content with the mobile data plan. Airtel and Vodafone customers get complimentary access to Amazon Prime and Netflix if they upgrade to a higher-value monthly plan. The Cellular Operators Association of India (COAI) believes that telcos which have so far just sold SIMs will have to rethink their strategies because margins from selling SIMs are wafer-thin now.

“If the telcos could use bundling to get a share of wallet then it could work. If the telco knows that you watch movies and you spend some money going to the movies every month, then can the telco get a certain percentage of that spend? If the operator gives you Netflix or Amazon Prime, can it monetize that? The problem right now is that the telco is not being able to monetize it. A lot of content is free…and if telcos don’t differentiate on the content proposition, they are just selling you bandwidth and they will be back to square one,” said COAI director general Rajan Mathews.

The lobby group also believes that fiber-to-the-home becomes an important piece in the puzzle as 80% of all data consumption comes from a fixed location. Operators have just scratched the surface in this market as, according to data available with the Telecom Regulatory Authority of India, as of end September, there are just 18 million wired broadband subscribers in the country compared with over a billion wireless subscribers. “Operators are dreaming of capturing the entire home experience with a bundled service, but they would need to rework their operational strategy. With users freely switching between devices for services, operators would need to embed a lot of intelligence on their networks to ensure minimal impact on quality of service when switching devices,” an analyst said requesting anonymity.

As operators bank on blending services that would ride on the fiber, the crucial factor for success would be to ensure that the bundled product on offer is more than the sum of its parts. If not, consumer stickiness is a long way off and there’s always a free website to get your fix. – Live Mint