How global telecos can profit from India’s experience
As many wireless telecommunications operators around the world reach saturation points in consumer penetration, they fear hitting a growth wall. These companies face mounting competition, declining average revenue per user (ARPU) and steeply rising costs.
March 30, 2011 / 21:55 IST
As many wireless telecommunications operators around the world reach saturation points in consumer penetration, they fear hitting a growth wall. These companies face mounting competition, declining average revenue per user (ARPU) and steeply rising costs.
All these factors put tremendous pressure on their margins. Increasingly, wireless companies must hunt for ways to squeeze more from their business model--but where and how? To find answers they might consider dialing the country code for India. Indian telcos continue to thrive despite serving users at bare minimum rates. Their ARPU is a fraction of comparable telcos in developed countries. For example, in 2009, Indian wireless ARPU averaged just USD 2.90 a month.Compare that with about USD 50 a month in the US, a little over USD 22 a month in Germany and nearly USD 58 in Japan. Even in developing countries like Brazil and Mexico, ARPU averages close to USD 13 and USD 14 a month, respectively.Yet, Indian wireless companies excel in eking substantial returns from thin soil. Leading Indian players like Reliance Communications and Bharti Airtel (Airtel) enjoy EBITDA (earnings before interest, taxes, depreciation and amortization) margins of more than 30%. These compare well with global competitors such as AT&T, Verizon, Deutsche Telekom, Vodafone Group and Telef
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