Telcos’ move to raise revenue may widen risk of customer churn

KOLKATA: Telecom operators face a catch-22 situation. On the one hand, they need to quickly unveil higher value bundled plans offering bigger chunks of data in the popular 28-day category to boost average revenue per user (ARPU) — a key performance metric. But such a move could trigger mass customer migration to the new 28-day packs from the longer 84-day category and increase the risk of churn as consumers on shorter-duration offers switch operators a lot quicker if they are dissatisfied with the quality of services, said analysts.Bharti Airtel, Vodafone Idea and Reliance Jio Infocomm had raised tariffs of bundled prepaid services plans 14-33% just over a month ago. But analysts said that would not be enough to revive the telecom sector as the popular 28-day plan offering 2GB of data saw only a 15% price rise to Rs 148.Deutsche Bank said telcos should move towards new plans with 5GB, 10 GB and 20 GB of data on the 28-day cycle priced at Rs 200, Rs 300 and Rs 400 a month respectively, a scenario that would add an extra Rs 50 in monthly ARPU from data users.Analysts said broadening the basket of 28-day plans with bigger data packs would also improve network predictability and peak hour load management for telcos. This is since telcos would have a better grip on how much data capacity to provision, reducing overall network load as a chunk of customers on the 84-day plans (with much higher data allowances) could potentially migrate to these new 28-day variants offering more data but still lower than in the 84-day plans.Rajiv Sharma, research head at SBICAP Securities, however said “the risk of customer churn rises on 28-day plans as opposed to the more stable 84-day variants as consumers on the former tend to take calls on switching operators more often if they are unhappy with voice and data experience”.Telcos are likely to increase prices another 25-30% by 2020-end, said experts, with ARPU still well below the Rs 180-200 pre-Jio level and overall telecom-related consumer spends in India among the lowest globally. They said telcos could face some tough choices soon over whether to unveil new 28-day plans priced at a premium to boost ARPU at the risk of potential customer churn.Rajan Mathews, director general of the Cellular Operators Association of India (COAI) — which represents Reliance Jio, Bharti Airtel and Vodafone Idea — said he expected “operators to take extreme care in ensuring they do not lose their high-margin consumers on the longer-validity plans, even if they were to tinker with price points and expand the basket of the 28-day plans with bigger data allocations”.Mathews also ruled out the likelihood of churn, in the event new price points are introduced in the 28-day category, reasoning that “any potential pricing revisions in the 28-day category is unlikely to be confined to a single operator, especially at a time when all major telcos have raised tariffs”.Analysts, however, said customer churn would increase in a regime of rising prices as consumer focus would shift to the quality of services and telcos failing to make the cut on that score would stand to lose users and revenue market share.

from Economic Times https://ift.tt/2GtVHJa