MUMBAI: Mobile phone subscribers may have felt some relief in the past few months, having stopped receiving incessant calls from rival operators asking them to switch loyalties. This is because India's older telcos –
Vodafone Idea and
Bharti Airtel – have stopped their poaching activities, in a sign that the industry could be returning to stability, with all three carriers – the third being latest entrant Reliance
Jio – close to each other in terms of revenue and subscriber market share.
Industry officials and analysts said the aim is to protect one’s turf and reduce churn, which will also help to cut down on subscriber acquisition costs, helping operating margins.
“We have stopped making pesky calls to competition base for daily offers, or offer for only today, via auto-diallers. With three large players that are almost equal, it is a given that if I do it (call subscribers of rivals daily), somebody else is also going to do it to me,” Balesh Sharma, CEO of the India’s largest telecom operator Vodafone Idea, told ET.
“This is going to stabilise revenue, or cost, or whichever way you want to look at it,” he said.
According to a senior industry executive, Bharti Airtel too has stopped poaching customers with daily offers. The number two telco did not respond to ET’s queries on the matter.
“Customer churn in the telecom industry is a major concern for operators. In some instances, almost 30% of an operator’s customers can turn over in a year. This imposes significant costs on an operator,” said Rajan Mathews, director general of Cellar Operators Association of India (COAI), an industry body representing the private players.
“It takes over Rs 1,500 to acquire a new customer, and three times is lost in revenue when a customer is lost,” said Mathews. While operators can aggravate churn by offering customers short-term inducements to switch, COAI says this form of induction is best avoided. “This further increases costs,” Mathews explained.
Rajiv Sharma, co-head of Research at SBICap Securities, warned that this approach may be short-lived if any one of the three private sector telcos were to change tariffs. He, however, said this step makes financial sense for older telcos, already under financial pressure. “When poaching happens, gross addition in subscribers go up for the industry and churn increases. As such, the selling distribution costs go up which intensifies margin pressure for the operator,” he said.
Analysts said in a price sensitive market, it was easy to sway customers with daily offers but now with profitability erased, operators may have decided to put a plug or reduce such poaching attempts.
Vodafone Idea had 409.37 million customers while Bharti Airtel had 340.31 million as of February end. Reliance Jio had 307 million customers as of March.