Blue Screen Of Duds

Where the alter ego of codelust plays

Will spirituality save the telco soul?

with 3 comments

Seems like the slowdown in revenue for mobile operators from existing services is not just an India-specific problem. Jupiter Research has recently done a correction for its forecast for Western Europe to 910M euros in 2011 as far as ringtones go.

It has been a known fact (keep hearing that at the various conferences and industry meets) for a while that the average revenue per user in terms of calls had been on the decline for a long time and services like SMS, ringtones and other downloads were meant to keep it booming for a long time to come.

And that is the reason why Vodafone is hitting the consumers hard with their new and lovely advertisements for services that stay within the network. All the things they are pushing at you — astrology, news alerts, Art of Living updates — are nothing new, they have been around for a while, but the way they have recast it says a story in itself.

Each of the new Vodafone service is priced at INR 30 per month to the subscriber. The costs that the company incurs in getting the service online is acquiring the content to support it, the management of the same content and the billing parts of it.

Content acquisition costs are normally never tied to the subscriber base, unless they happen to be be a ringtone or a download. Which would mean that their margins would go up with every new subscriber they add on for a service. The other cost point for them would be the billing and content management services, which I don’t think (okay, sue me for the blanket guessing here) is again based on volumes, leaving the service provider with decent margins all over again.

That leaves us with distribution, which is one factor that costs pretty much nothing to the company. Most of the services (maybe, even all of them?) are SMS based. These services are available only to the service provider’s subscribers, meaning that the traffic stays well within the service provider’s network, leaving all the interconnect and revenue sharing problems out of the window and a larger chunk of the revenue for the company to keep for itself.

That leaves us with an interesting set of projections. Even 20% of Vodafone’s subscribers singing up for at least one such service would earn the company truckloads of money. Current estimates are that by the end of 2007 Vodafone would have around 38 million subscribers in its network. Take 20% of that and multiply it by 30 and you’ll get the point that I am getting at.

Going forward, a smaller percentage of that 20% will probably subscribe to multiples of these services, kicking up the revenue per user even higher. And all of this is happening at near-zero or minimal cost to Vodafone. So, next time you wonder why Vodafone is going bonkers pummeling you with all the nifty ads that should be costing them a pretty penny, remember that some sucker somewhere is actually signing up for that service and giving plenty of reasons for Mr Sarin to smile about.


Written by shyam

January 4, 2008 at 8:08 pm

Posted in advertising, India, Mobile

Tagged with , ,

3 Responses

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  1. Rs 30 per service is way too high given ARPU is less than Rs 300. 20% is extremely optimistic. It would be more like 1%.

    Rs 5-10 price point should be take-off point. Till then, the users will just enjoy the wonderful ads.


    January 5, 2008 at 2:19 pm

  2. […] has an interesting take on the value added services being offered by the various companies. Here is his write up. I liked the last para and merits an addition here: Going forward, a smaller percentage of that 20% […]

  3. Your primary concern seems to be that Vodafones’s revenues are going up.. What seems your problem to be? Do you want all services to be provided for free? Already you are paying almost nothing for calls.. If you want a socialist regime go for BSNL.. You dont want to pay and expect services to be at your beck and call. Stupid Indian socialist mentality..


    April 29, 2009 at 12:53 am

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