Tuesday, December 30, 2008

Mobile ARPU in India - Right Indicator?

Imagine a country with 25mn population growing at rate lesser than 1% per annum, per capita income $ 10,000 p.a. and having 85% mobile pentration. It is very difficult to even add 50,000 new customers every month. Most of the times customers will come from competition churn. It makes growth purely a function of ARPU. (Revenue Growth) = f (ARPU)

Now Look at condition in India where every month approx. 7mn new customers are added and telecom (cellular) density is just brushing to 25%. Per capita income of is about $800 p.a. Growth will hapeen more rapidly in rural area. Can revenue growth be a function of ARPU only? Can ARPU be the right indication of Indian telecom? For next 4-5 years till the time price hardening happens, dip in ARPU will be continuous... till the time teledensity increases to the level of 75% about.
(Revenue Growth) = {f (Market share, Telecom density, ARPU1)/f(ARPU) }
where ARPU1 is ARPU earned from the customer over long period...

The point I am trying to make is do not look at ARPU as significant indicator of health of Indian telecom company. Look at how innovative telecos are in terms of customer care, reducing churn.
Gross churn number could be one of the good parameter to compare among peer companies.
More the customer stays on the network more benefital it becomes. cost of aquisition of new customer is significant, new cust. typically takes 2-4 months to start billing to its full potential, cost of competition churn is also not insignificant...
Make the customer happy and try to keep them on the netwrok as long as possible which makes it more and more profitable and more and more difficult and costlier for the competition to churn 'Happy customer'... ARPU is bound to dip further as IUC - termination charges reduces, new competition comes in and operator goes 'Rural' for further aquisition..
(Profitability) ~ {f ('Happy & Loyal customer')/f ('Gross churn')} leading to rev. growth
Blog ends here.. But there is much more to this to discuss and share with like minded... Call me/ e-mail me/ add comments here. Let us improve collective understanding of ours to help increase % of "Happy Customers" on the network leading to little more happier India .. ;-)

1 comment:

Utopianthots said...

I think, the market will actually be in two fragments i.e.Acquistion will be drive by rural markets and ARPU will be driven by urban markets. Good connectivity, service etc will be actually become hygiene issues and companies who dont view it like that, will struggle to survive.