Indian Telecommunication Market is in for a shake up ! AIRTEL-VODAFONE-AIRCEL-IDEA : JIO

With Reliance Jio entering the Mobile network market in India many believe it has started a war of sorts and the whole market is panicking. 13,500 crore Rs. was lost in market capital in a single day and tariff cuts are being announced by Airtel, the largest mobile network service provider in India.

But if we have to analyse this brick by brick, we can dismantle the new wall built by Jio and Airtel or any other mobile network for the matter of fact can be peaceful at mind and concentrate on retaining their customers in a more friendly manner. I have split this blog into 3 parts for better understanding :

- Prequel
- Present
- Sequel

Market share by service providers as on 1-Mar-14

Credit:www.telecomlead.com

PREQUEL 

Before any new entrant hits the market with a big plan and capital in hand, we can be rest assured that the industry leaders will be well informed about the new entrant's move if not for the full picture atleast partially. This partial information should be enough for the experienced market leaders to take decisions that should keep the new entrant in check. Airtel's move to give away 5GB free data for every broadband user was a preparatory move but was it successful, I would say it did not really impress its existing customers nor did it create enough excitement in the market to get new customers for Airtel.

Both Vodafone and Airtel came up with flexible post paid plans that were quite user friendly unlike their earlier either rigid plans or plans with hidden terms that gives you bonkers every month. Airtel even came up with an open network promotion where they advertised about their existing tower locations and they claimed to be transparent to their customers. But where both Vodafone and Airtel lost is in gaining customers' trust and that is what has left them to panic right now, for customers will be more than willing to port their numbers to Jio and currently it seems the effort needed to port one's number to Jio is worth it.

PRESENT

Porter's 5 forces is the best tool to explain the current situation

- Threat from New Entrant

- Threat from Substitutes

- Competitor Rivalry

- Bargaining Power of Customers

- Bargaining Power of Supplier

Threat from New Entrant

This is the first or the real threat that has caused ripples and activation of the other 4 forces. Reliance Jio is the new player in the telecommunication space but Reliance is not taking things for granted and they are playing their cards carefully unlike the original Reliance Communication's (RCOM), currently owned by Anil Ambani, entry into the CDMA mobile network which was and is not so successful venture.

Reliance Jio unlike RCOM which gave away handsets for free with no proper recovery mechanism leading to huge losses, is betting on cheap tariff charges alone to attract customers. This has directly hit the customer base of the existing large players who have huge customer base with less or very little loyal customers.

The cost of entering the mobile network market is very high but with Jio's capital investment power of 1,50,000 Crore this is very much achievable and it can be done with sheer style and strength.

Threat from Substitutes

The entry of Jio has created a new substitute for the existing networks and in fact it has also created new substitutes within the existing players due to drop in tariffs among the latter. This time substitute is not in the form of products but it is in the form of service providers. Now customers have a new service provider who says he will listen to their requests, give them free call services, low data tariffs and please them with offers.

The worse thing that existing players can do right now is to match the plans that the new substitute is offering and sadly that is what is happening right now.

Competitor Rivalry

Competitor rivalry was always there in the India mobile network market but it was not that aggressive all this while because one way or the other we paid the same amount as tariff to all the service providers, so customer's preferred to pay a bit more and stay with a good mobile network provider rather than being pulled by offers with hidden terms and conditions.

But with Jio's entry it has all changed and there is a new rivalry again in the market and this time experts call it a war due to the aggressive stance Reliance has taken. The rivalry will only worsen now, at least for the next few months until the dust settles.

Bargaining Power of Customers

With the above 3 forces acting in conjunction with another on each one of the service providers, the bargaining power of the customer has increased. In fact customers can now call up the customer service and ask for discounts on their post paid bill to stay in the network, if you are taking this for a joke try it for yourself and you will be successful if you pitch it right.

The bargaining power of customers will only increase if the existing players and the new entrant keep fighting to expand and retain their customer base.

Bargaining Power of Supplier

In mobile network market, the only supplier for telecommunication network is the Indian Government. So there is not going to be much change except for players betting higher to get more spectrum. If the betting is more aggressive then it can lead to huge capital expenditure but since these are amortised and paid to government over the period of 10 to 20 years it can be kept under check.

Bargaining Power of Employees

This is one force that we look down or shy off and it is not part of the Porter's 5 forces but this is a serious force that can come to devour into the efficiency of the existing players. With an entry of a new and big player in the market, it is sure to attract existing talents. The new player can bring in new hardware, new offices, new network, new ERP but he will require experienced talents from the existing market and if the big players were not treating their resources well then they are going to be in for a bigger surprise. Attrition can impact the overall efficiency and it can worsen the panic situation for a new employee will not understand the core strength of the company and will play the wrong cards at the wrong time, only to worsen the situation further.

HOW TO HANDLE THE SITUATION

Now that we have seen an overview of the existing market situation, the existing players should come up with quick and actionable business plan to tackle the threat and rivalry created by the new entrant. We can come up with a few DOs and DON'T and plan of action

Don't create a panic Situation

Do not panic and create one in the market as it will lead to a worser stock market situation which has already happened in this case.

Understand the strengths and weakness of the new entrant and your competitors, if you have already done a SWOT for your competitors do one again because your competitor's strategy has been altered by the new entrant just like yours.

This will give you the insight to hit the right cord with your customers and retain them. This will also create new opportunities to pull the confused customers, from the existing rivals, who are not sure whether to change their network to Jio or not

Avoid Hidden Charges

It's high time you stop charging customers heartlessly for their ignorance, like draining the entire airtime for no reason within a few minute once the data pack is 100% consumed or charging randomly a few customers with no reason at all and then giving them lame excuses to justify that through untrained call centre employees.

Instead be transparent to your customers, charge them for what they use. Do not give them nightmares and train your call centre employees to handle customer's properly. Put decision makers behind the telephone and not parakeets who are worse than your automated answering services.

Avoid Price Cuts

Do not go for price cuts to match the new entrant all of a sudden. This will be the worst thing to do. Customers are now more cautious and educated, they can very well understand that if you cut the price now that means you have been looting them all this while or you are temporarily doing this to lure them to stay. This will only encourage them to switch if not to Jio may be to any other network.

Instead give them freebies and loyalty bonuses such as free talk times and excess data on recharges. When a customer applies for number portability through message, give them a call and tell them that they have been qualified for free talk time and free data pack and credit it instantly to their account. Then if your call centre contacts them for portability, for sure most of them will cancel the application for portability. This will retain them until the excitement created by Jio settles and they will stay with you after that for you have created a connection with them. And DON'T TRY to recover this freebie from them later through hidden charges.

Use Analytics

Perform competitor analysis and see what strategy they are adopting to tackle the situation. You got to have ears and your ears got to have ears in this situation to gain as much information as possible about the market situation. Only data analytics will not help you in this area, inputs from industry experts and information from your ground staffs will help you do the right thing.

Perform customer insights to see what segment of your customers are dropping out of your network and why. Try to gain deeper insights with the help of your data analysts, they are the most valuable resource to your right now. Mining your data to get patterns and to understand where you can concentrate to retain your customers, by looking at their usage trends. Start customer centric promotions and give loyalty bonuses based on the respective customer's usage trend. It will save you money and help you do just the needful to retain your customers by putting a big smile on their face.

Check for high usage and loyal customers who have stayed with your for long and give them bonuses as talk time or data without them asking for it. Do not ignore them assuming they will continue to stay with you.

Treat your employees well

You need your employees now to your rescue more than ever before. Get your ground staffs and operations team motivated. See for opportunities to do it with little operational expense. Let the CEO do the talking and address the employees through conference. Explaining the current situation and guiding them how to pull it off. Do not let them move to your competitors. It also depends on how well you have treated them so far, if you haven't treated them well then please get yourself prepared for the stormy days to come.

The worst thing you can currently do is to cut cost by reducing usage of paper, by stopping or reducing the quality of services, beverages and snacks provided to employees. This will be a 'Penny wise pound foolish decision to do' and if you are going to cut your employees increments during appraisal it will take a toll on your best performers. Ask your HRD to do a more performance based appraisal and not the regular bell curve. Give spot awards and introduce Gamification in your organisation, this is the best time to implement it to keep your employees' moral high.

Advertise and Connect

Connect to your customers and indirectly you have to highlight the faults of your competitors with humour by projecting your strengths just like what coke and pepsi does to each other. The best thing for Vodafone to do will be to reinstate their ZOO ZOOs for they will bring back the glory days of Vodafone and gain customers, they can be put to the right use to mock at the competition.

Do not spare your competitors in the commercials and do hit the sweet spots with your customers, put your marketing team to work to come up with a creative marketing campaign. This will be the joker card that will bring you fortunes by winning this game of rummy that Reliance has pulled you all to play, willingly or unwillingly you will have to play it, spectators have no room.

SEQUEL 

Now for the Sequel, if you can get the solutions mentioned above put in place and analysed, you will build resilience and survive the storm. There are so many lessons to learn from this market disruption attempt by Jio. Your business strategy is being put to real test and if you find it faulty, have the heart and mind to accept it and change it for the better, being rigid and stuck to your point will only throw you to the backseat for you to never raise again.

Reliance Jio has adopted a 'Red Ocean Strategy' and it has not only disrupted the market for the existing players but also for itself. It has created a price competitive market rather than a customer centric market. Being a new player this will give a lot of hick ups to their own operation because it will not be profitable and even after amortisation of the capital invested their balance sheets will be out of balance for the first few years. This means pressure from investors and capital crunch. It may lead to poor network coverage and customer service and when the excitement dust settles it will settle only to bury them in their own ditch.

This is one of the main reasons why not only did the share value of Airtel, Vodafone and Idea fall but so did the share value of Reliance Industries.

But if they have the financial band width to accommodate all this loss as a investment cost to enter the new business area and either write it off as loss or amortise it and show profits with higher customer happiness index and network quality then the competitors will have to run for their money. But this is hard to come by in the ruthless corporate world where investors spare none and if the investors lose faith then Jio will end up being one of those second tier players in the market with lot of hidden chargers to recover the losses incurred and with cost cutting down the line leading to resource attrition and unhappy customers. But only time and customers can decide this, all that the network providers can do right now is to truly impress their forgotten customers.

If you see mergers of relatively smaller service providers then don't be in for a shock. It is still a good option to tackle a giant as big as Reliance. What an 'idea' sirji !