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Competitive advantages and profitability in India's liberalised market

India’s telecoms industry is now confronting its biggest challenges, with major investments in OSS Systems. Georgia Hanias draws on her vast experience of the Indian telecoms market to explain how new technologies can help India progress towards becoming a key telecoms player worldwide.

India’s telecoms industry is now confronting its biggest challenges, with major investments in OSS Systems. Georgia Hanias, a freelance journalist working in the telecoms sector, draws on her vast experience of the Indian telecoms market to explain how new technologies can help India progress towards becoming a key telecoms player worldwide.

Now that India’s telecoms market has opened its arms to greater levels of competition, communications service providers - particularly mobile operators - are trying to find ways to profit in this new environment. It comes as no surprise, therefore, that one of the fastest growing niche markets in the region has been OSS back-office systems such as rating, charging and interconnect billing. Millions are being spent on these behind-the-scenes technologies, with the aim to rate, charge for services and simplify billing processes for operators, thereby helping them to maximise revenue streams through various settlement processes. For operators such as BSNL, Bharti, and Reliance, innovative new charging systems have helped address the key business objectives of increasing customer loyalty and reducing churn.

Mobile boom

All eyes are on India as she enters a period of telecoms deregulation and unprecedented growth. A recent report from Gartner Inc estimates that Indian mobile revenues will climb at an annual rate of 18.4% to 2011, generating a US$25.6 billion market - the largest in the world after China. In 2Q07 alone, India’s mobile service providers added close to 20 million new mobile subscribers, increasing the country's total telecom subscriber base to over 225 million.

Not surprisingly, this level of growth has fuelled strong double-digit revenue increases for India’s top five private operators, and has generated a sense of optimism not felt in Europe since the early days when mobile phones had just entered the mainstream market.

Gartner’s report suggests, however, that long-term profitability will take more than simply adding more subscribers to the customer base in order to sustain high levels of growth. It notes that as operators continue to expand into rural areas where the market remains untapped, they will see their annual average revenue per user fall significantly. Other factors, eg, increased competition and tariffs cuts, will present further challenges. To remain successful in the long term, therefore, operators will need to take advantage of economies of scale to increase their profitability. Cost-saving approaches One approach to cost-saving that has been growing in popularity is infrastructure sharing, and several operators are dividing their mobile base station assets into individual business units. Those units will focus on managing tower-sharing agreements with other operators so that they can expand their geographic network coverage without having to deploy more base stations.

Sharing base stations, however, will not reduce spending enough to address some of the great threats to profitability, such as customer churn. These days every major operator in India is offering similar mobile services on their handsets, with a constant stream of new offers and tariffs aimed at attracting customers from their rivals. It’s a melting pot for the customer who can now switch contracts on a whim and without much consideration for their telecoms provider. The only alternative left for operators to remain ahead and to keep customers on their side is to engage in a price war for competing services. Obviously, this approach cannot translate into a financial bonanza for the service provider without cutting even further operational cuts to stay afloat. This is why the market for OSS systems continues to remain strong in countries such as India.

OSS solutions in a competitive market

Operational Support Systems (OSS) are making it possible for operators in India to establish better interconnection agreements with partners and to generate extra income from rating, charging and billing for services in real-time on their network. This investment is part of a recent boom in sales for telecoms equipment in the country which, according to Indian research firm In-Stat, is set to be the fastest-growing in Asia over the next three years.

Domestic demand for telecoms equipment will be worth an estimated US$10 billion a year by 2010 and the market will increase by 10% a year during that time.

Patrick Kelly, Analyst at OSS Observer, asserts that the demand for OSS systems in particular is growing rapidly, and estimates that global sales will rise from US$15.5 billion in 2006 to US$25 billion in 2011. Emerging markets like India will be among the biggest buyers of these ready-made solutions. "Disruptive forces in the global market will create more demand for commercial software systems that were unavailable in the past," explains Kelly in a recent report. "The level of complexity in the network, service, and application layers combined with a multi-layer eco-system of content, media, and telecommunication companies will force Communications Service Providers (CSPs) to restructure their business to adapt to changes in the market. Internal development teams will not have the luxury or the time to build highly customised software systems for billing, customer care, and network operational management."

Case study: Bharti increases control of its operations

Bharti is one of the many big players in India to invest in real-time charging systems to help reduce operational costs and decrease time to market when launching new, advanced mobile data services. The operator currently relies on a real-time charging and control system called Charge it, which is the flagship product of French-based mobile charging vendor VoluBill, in order to charge for its WAP and SMS services. The Charge it system has successfully given Bharti more control of its operations – allowing the operator to quickly and efficiently implement sophisticated, value-based charging strategies that help to differentiate between innovative packages, bundles and promotions. Charge it uniquely delivers "on the network" mobile data charging through its ability to access customer information in real-time, and then using this information to perform real-time charging and session control. This approach cuts costs and allows the operator to use its extra time and money to grow the business while offering very competitively priced services to customers.

The Charge it solution is one of many systems finding its way into the Indian market, and Bharti is not alone in its OSS investment. "The future for emerging markets such as India will depend on telecoms companies generating income through flexible settlement practises," explains John Aalbers, CEO of VoluBill. "Network-aware charging systems are crucial to this development and we are investing more time and resources in the country to ensure that we strengthen our position as a reliable vendor in this market. This will inevitably mean that VoluBill will have to expand its solution portfolio in the future to include other OSS/BSS functions that are in great demand, such as customer care and billing."

Retail billing solutions

Aalbers goes on to state that the global retail billing market is approximately the same size as all other sectors of the OSS industry combined and it is this business niche where the biggest billing contracts in the world are signed. "As the telecoms sector in India evolves to support the unbundling of local loops and greater access for new players, scalable billing solutions are becoming more and more crucial for business growth. This is especially true for retail billing, which can be a major source of revenue for telecoms operators. For major tier one companies, this can add up to hundreds of millions of dollars each year, provided that the necessary billing systems are in place within the network."

For most telecoms players in India, the concept of retail billing is still relatively new, especially incumbent operators who are used to being the only provider of telephone services. But the big operators such as Reliance, Tata and BSNL to name just a few, have already invested in systems by major providers to help them simplify retail billing, eg, by using technologies that offer convergence and unified charging. Open markets, new challenges Investing in retail billing systems – whether domestic or foreign-made – means that telecoms providers in India can achieve many vital charging and settlement requirements automatically. This includes the evaluation of a call and its network details from beginning to end to prevent any form of settlement errors from occurring, such as overpaying operators for network usage and not accurately charging partners for its own services.

Without the right systems, the financial losses can be too great for India’s operators to ignore. It is widely accepted, for example, that the average telecoms operator loses between 2% and 5% of revenue with 8% of billable minutes never appearing on an operator’s billing system. In financial terms this can translate into millions of dollars in missing revenue. This is money that could be redirected to building better networks or launching new products and competitive pricing for new services: essential business strategies for keeping ahead of competition. As a marketing tool, retail billing systems are also extremely useful to operators as they can provide online reporting capabilities to give companies the possibility to analyse and forecast usage for products and services, such as directory enquiries and toll-free numbers. This helps to understand trends in the marketplace and to determine what types of new services could potentially increase the company's revenues even further.

WiMax and bridging the Digital Divide

Many factors are currently contributing to demand for telecommunication services in India. One such major trend is the rise of mobile broadband, otherwise known as WiMax, which is proving a useful innovation in India, where the telecom infrastructure is still developing and last-mile connections are usually achieved through copper cable, DSL and fibre optic. The installation costs of using these materials are cost-prohibitive as they require disrupting roads to lay down cables. The chance to provide these connections wirelessly, without installing wire or copper cable in the ground, greatly drops the cost of providing these services. This is why WiMax is proving so popular, as it offers a cheaper way of extending broadband services to vast tracts of the country. Some analysts have even predicted that the WiMax market in India may even become the biggest in the world, which also translates into a new market for OSS billing systems as well.

The growth in popularity for WiMax is helping the government’s overall push to bridge the Economic Divide in the country. The goal is to unite the country's huge rural population to India’s expanding telecoms network. At the moment, less than 30% of India’s 1billion people live in cities; the rest reside in 600,000 villages across the country. Presently, the telecoms network connects only about 4,500 towns and cities and 65,000 villages. To address this issue, the Ministry of Communications and Information Technology has developed a comprehensive plan to help connect the unconnected parts of the country onto a telecoms network by 2010.

The plan has outlined a series of ambitious targets, such as having 500 million mobile phone subscriptions and ensuring that 85% of the country is covered by a mobile network. The government initiative also aims to push mobile penetration rate to 90% and have 80 million mobile connections in rural areas by 2010. To this end, the ministry plans to make available mobile handsets costing just US$25 by early 2008. These low costs will make it even more difficult for operators to generate revenue from handsets and services but with the help of OSS systems they may just find a way. Best of all, they bring a fast return on investment (ROI). It is estimated by the OSS industry that installing a solution such as a flexible interconnect platform can allow companies to increase their revenue stream by 30% in their first year. This is money that Indian operators can reinvest into their infrastructure and make issues like the Digital Divide a thing of the past - sooner rather than later.

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