What could trigger the success of 4G services in India?

Indian telecom industry after its market liberalization and growth since 1990s has become the most competitive and one of the fastest growing telecom markets in the world.

The Industry has grown over twenty folds in just ten years, from less than 37 million subscribers in the year 2001 to over 903 million subscribers in the year 2013. India has the world's second-largest telephone user base with over 903 million users as of Dec 2013. It has the world's third-largest Internet user-base with over 198 million as of Dec 2013.

Telecommunication in India has supported the social & economic development of India and has played a vital role to narrow down the rural-urban digital divide to some extent.

As per the current market situation India consist of around 200 Million internet subscribers out of which 180 million subscribers use it on mobile phones. Out of 180 million mobile users only 67 millions use it on Smartphones & others use it on the feature phones.

In current technological scenario India is well equipped with the upgraded 3G services in the lights of services provided by Vodafone, Idea, Airtel & other major operators but most of this networks are underutilized due to low rate of upgradation from 2G to 3G.

The penetration of 3G is around 7 percent of the total wireless subscriber base in the country and the picture is not as rosy as it appears.

Major challenge for Indian telecom industry today is to increase utilization of 3G services & get ready for upcoming 4G upgradation. To upgrade people from 2G to 3G services telecom companies are taking major steps by lowering 3G data prices & increasing 2G data rates reducing gap between both of the services & expecting people to upgrade into 3G. It’s been long time since the launch 3G; it has been underutilized & created financial debts in companies who have invested in 3G infrastructure.

It is necessary for all the major service providers with 3G/4G services to upgrade their users & attract new cutomers from 2G to 3G/4G for which some concrete steps are needed to be taken.

Recently we conducted quantitative research in Mumbai with 250 random samples of users, in this research we tried to understand what it will take for the telecom companies to upgrade their customers from 2G to 3G or 4G services.

Preference of 3G over the 2G services

From the above Charts it can be observed that 55 percent of existing 2G subscribers are willing to switch on 3G services.

From the age group of 19-30, 57 percent of the existing 2G customers are not willing to adopt 3G services with the majority of them giving reasons like high cost & high satisfaction with current 2G services.

For 19-30 age group customers, High Speed Internet is on top most priority followed by whatsapp media sharing & quality of network with price in consideration of 3G.

Views of existing 2G customers who are not willing to upgrade services

55.17 percent of customers said that they don’t switch to the 3G services from the existing services because for many of them high cost of 3G is major concern & many of them feels satisfied with the current 2G services.

Views of existing 3G customers

On the other side the customers who are already using 3G service users, prefers 3G services over 2G because of below preferred attributes.

For the customers who prefers 3G services, attributes like Network quality, High speed internet, Media file sharing, Connectivity with PC, Skype & Video streaming are more important than that of its concern for price and video calling feature.

Video calling features offered by operators is considered less important than that of the video calling services through OTT service providers like Skype & Tango. The major reason for this may due to lack of ecosystem with front facing camera phones, & the less number of 3G customers.

Customers seemed to be neutral to speak about HD live gaming & Live TV. May be because in India still ecosystem is not ready to attract people for using such kind of features.

Above statistics raises the biggest question for the 4G launch "Can 4G services attract such price sensitive & quality conscious customers?" " Will 4G succeed in India or will create an additional burden of debt on industry?"

Well, Only time will say about the future of 4G in India & is totally dependent on the way this service is offered by operators.

What customers expect from 4G?

In research, we tried to find the expectations of customers from 4G services & which of its attributes will attract the most for consideration of this service.

Price which was least preferred in 3G compared to data speed bounces back as a most preferred attributes of 4G after quality of services, from this it can be interpreted that people already using 3G services may not switch over 4G if the price is very high, considering their happiness with the speed offered by 3G.

Major attributes that can drive the growth of 4G may be Combo Offers, Free 4G handset with fixed monthly rentals for services, High Speed Movie downloads, & Voice calls through the internet with no per minute/second charging. Hence companies like reliance which is expected to launch 4G services should promote this attribute through advertising & promotion.

Conclusion:

From the analysis & interpretation, we can conclude that customer who are using 2G services may switch over 3G or 4G services if they are least satisfied with the current services & are looking for the high speed data services without giving up the quality of network services. Another reason which will let them shift from current services is the use of Smartphone, which appeals customers to use data services.

Customers wanting to have experience of high speed internet, media file sharing on whatsapp & other OTT services, net connections to pcs , download large attachments on mails, real time streaming of music & videos (eg. YouTube) & Skype video calls are more likely to switch from 2G to 3G services.

These customers might give less importance for the cost of services over the quality of services & speed of data. If a customers is least satisfied with 3G services then there are chances that he/she may switch back to 2G services.

Major reason for customers not switching to 3G services from that of current 2G services are the high cost of the services, good satisfaction level with the 2G services. Other reasons may be that customers are not used to internet services on phone or maybe they are having wifi at home & office.

It will be challenging for 4G services to attract customers, especially the ones who are users of 3G service. These existing 3G users are already using satisfactory internet services speed & hence to attract them for using the 4G services, it is necessary to create differentiated values.

Based on this survey customers are more likely to be attracted towards 4G, if attributes like network quality, price points, combo offers (Internet + Voice + Cable TV), availability of 4G supported handsets, voice calling without pulse charging are made available to customers. Out of this Combo offer, Pulse free voice calling, & high speed file downloads (say Movie in 3-5 mins) will be differentiating factors to attract customers.

Unlike 2G customers who first look for high speed internet & quality of services & then give preference for price. In 4G services customers are most likely going to consider prices over other differentiating services. As per the question asked on survey people are more likely to pay Rs. 300 to 350 for 1GB 4G data services.

Existing 2G customers are more likely to switch directly on 4G services if prices are kept low & customers are offered with various differentiating services like pulse free calling & free 4G handset with the fixed economic monthly rental.

Limitations of the research:

Geographical limitations as the survey was done only in one city i.e.: Mumbai and this response may not match with the universe at large.

The study is indicative only and the results are based on the limited sample size of 250 random customers who are mobile service users in Mumbai service area.

Recommendations:

A company like Reliance Jio which is expected to launch 4G services in the near future should promote their services while taking into consideration of various attractive factors. Better option to attract 3G customers will be by promoting differentiating services like Combo offers, Pulse less voice calling, & high speed file downloads (say Movie in 3-5 mins). They should equally take care of various price points & quality of service. Strategies to attract 2G service user can be by promoting services like pulse free voice calling & free 4G handsets on contract basis.

4G services should be offered in differentiating ways like home & office Wifi, Combo (TV + Phone+ Internet) etc. Since our ecosystem is not ready with 4G handheld devices, it necessary to create “on the go wifi” public hotspots which will offer high speed internet services to those customers who are not having 4G handsets. This will help in increasing the utilization of services.

It is necessary to attract more customers from 2G services to 3G services which can be done by lowering the price gap between 2G and 3G services. This could be done either by reducing 3G data pack prices further & make it closer to the 2G or may by increasing the prices of 2G data which many companies Airtel & Vodafone has already followed. But while deciding this price point it is necessary to take care of customers' willingness to pay because there is possibility that people might not recharge their internet pack & rely more on home & office wifi for mobility services.

Utilization of 3G services can be further increased by offering affordable wifi home & SME wifi services. This should be offered at competitive prices considering competitor like MTNL, Tikona, and DNS etc.

Major reason for the lower rate of migration from 2G to 3G is the cost factor which is seen lower in Mumbai considering preferences of quality of services & high speed internet. Hence, companies aiming to improve utilization of 3G services should concentrate more on quality & speed in metros like Mumbai, where majority of people find cost at least importance as compared to services factor. At the same time they should take care in limiting data speed of 2G & increase its cost which will push subscribers towards 3G services.

Expected outcome from the recommendations: 

4G services with its differentiating factors will be able to attract more customers & will be able to utilize its capacity in an efficient way if above mentioned recommendations are followed.

In the current competitive market scenario, it necessary for Indian telecom companies to find different ways to generate revenue. With the entry of OTT services like skype & whatsapp, revenues from SMS & voice calling are going through decline trends. It is necessary to generate revenue from different sources. Offering combo services, Public wifi & Personal home wifi will generate more revenue.

Using above mentioned recommendations will help in increasing utilization of network capacity & thereby will assist in improving returns over investments for debt ridden telecom companies.

Note: All the facts & figures are taken from the research report .
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