Are massive ad spends by telecom companies truly justified?

Marketing and advertising has always been a major expense for telecom companies. You switch on to any TV channel and chances are that you’ll see one or the other telecom company ad running. The prominent ones are Bharti Airtel, Vodafone Delights, Reliance Communication and Tata Docomo. However, in times when the telecom sector is grappling with one its worst phases ever, are such lavish expenses really warranted?

In last 18 months, the telecom sector has been plagued by the 2G scam and exodus of foreign players from the sector. Moreover, mobile number portability, though beneficial for users, has added to the existing cutthroat competition.    

Jo tera hai, Woh mera hai: Picking up?

Bharti Airtel , India’s largest telecom operator, spent over Rs 11,000 crore and managed to add 3.48 crore subscribers in January 2011 to June 2012 period. What’s interesting is that the company’s advertisement spends in the June quarter shot up by 22%, but it only managed to add 10% more subscribers, quarter-on-quarter.

* Sub- Subscriber addition (in millions), Ad- Advertisement Expense (Rs in Cr)

Keeping it simple?

Youth icon Ranbir Kapoor’s charm is yet to kick for Tata Docomo. Even though the company has spent close to Rs 400 crore on marketing and advertisement, it has lost nearly 4 million customers in the January 2011 to June 2012 period.

What an Idea, Sirji

Idea ’s most brilliant idea probably was to cut down on its advertisement spend.  The company managed to add nearly the same number of subscribers as Bharti Airtel and at one-third of market leader’s cost in the January 2011 to June 2012 period.

Note: Reliance Communication does not mention advertisement costs in its quarterly results. Vodafone is not listed in India, no data available.