Cheaper the better

Category: General | 1 Comment | Posted on September 13, 2005

Kripa Raman writes in Hindu about the low-cost handset market and it being a driver of future mobile growth for operators.

Talk to operators and they would claim that a sub-$40 handset (Rs 1,760) will grow their subscriber base by 30 per cent almost instantaneously; and a sub-$30 (Rs 1,320) handset might cause such an explosion as to render them unable for some time to handle their networks!

Operators are offering “Effective-Cost-of-Ownership” bait to the customers by bundling offers of lower rates for calls within the same network. This strategy has worked to some extent for Reliance in creating a viral / network effect and may work for Airtel which has a large nationwide userbase. Since it does not make sense for the user to choose a smaller operator in this case, it will result in the big fish getting bigger.

The smaller operators can counter this by actually lowering the cost of entry for a price-sensitive segment. Indian operators shy away from subsidising handsets, unlike many other markets, because of the difficulty in enforcing contractual obligations and penalising a defaulter.

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