The disruptor will always come with breakthrough innovation. In the Indian Telecom industry which is now 23 years old [since private operators were allowed to operate] Reliance Jio Infocomm introduced a new concept of electronic consumer verification known as eKYC authenticating the consumer with the world’s largest Biometric database. Idea Cellular’s eKYC Automation process has reduced Sales, Marketing and Admin cost by a whopping 21%. Earlier telcos wanted to staff more people in the subscriber form collection and verification process in attempt to drive faster subscriber activation yet despite this subscriber activation time ranged anytime between 4 hours to 2 days. Additionally the EKYC process allows telcos to have better control on subscriber quality and align trade incentives accordingly. We expect this to sustain and highlight that with this new process telcos have been able to cut down on the manpower and travel costs involved in this process.
Trade incentives and commissions should fall with SIM consolidation and the number of players fall from nine to maybe four. Move to bundled plans should drive tariff simplicity and reduce customer complaints/queries, easing traffic at telco call centres and driving cost savings. Also, telcos need not invest in large teams to manage thousands of tariff plans which is the case today. Also, the move towards unlimited voice plans and a large monthly bundle of data allowances has already narrowed the gap between post pay and prepay products and this may see some telcos shutting down post pay products as they have large overheads.
Telcos to Shut 3G Networks and Migrate towards 4G
Incumbent telcos run multiple / hybrid networks like2G/3G/4G, network opex is higher by c300-350 basis points. However over the last 6 months or so incumbent telcos across the board are making incremental investments largely in 4G and very minimal in 3G. We believe the next step will be a gradual 3G shutdown and we see this starting next year onwards. This may allow telcos to re-farm all 3G spectrum towards 4G in future and in a way reducing their need to add more 4G spectrum. We are not sure if 2G shut down will be anytime soon as data adoption beyond 500 million subscriber could be a challenge.