The Hindu Business Line : Competitive advantage in telecom

Though the cellular service segment was one of the earliest to go in for call centres and adopt customer relationship management programmes, the service quality is still far from the benchmark levels.

WITH the unification of basic and cellular licences, the number of mobile service players has leapfrogged. For example, in Delhi, MTNL's Garuda and Dolphin, Bharti's AirTel, Tata's Idea cellular and Indicomm, Reliance's India Mobile, and Hutch cellular are fighting it out for subscriber base. The price of service, which has been a major factor for attracting and retaining customers, is at rock bottom. In a recent review by the International Telecommunications Union (ITU), cellular telephony tariff, at $16 per month for a 300-minute basket, is lowest in India. And, price wars cannot continue for long as prices settle at near cost-plus-mark-up levels. It is time the various service providers looked at other avenues for getting that competitive edge.

In such a market, quality is an important factor in determining the overall competitiveness of the service-providers. Quality is multi-dimensional and is related to a number of features of the products/services. In telecom, quality can broadly be defined along two facets — infrastructure and customer service. Quality features that are related to infrastructure include fault incidences, network coverage, voice quality, grade of service, call completion rate, call dropping percentage, network downtime, accuracy of billing and variety of value-added services provided. These depend on the quality and extent of telecom infrastructure deployed by the service-providers.

On the other hand, customer service quality is based on perception of customers about pre/post sales service, service activation time, time to repair faults, knowledge level and courtesy of customer service agents, easily understandable offers and tariff schemes, dealer network coverage, metering and billing accuracy, and resolution of billing complaints. It is subjective and needs to be assessed using surveys.

Hence, the overall satisfaction level of subscribers is a function of price, infrastructure quality and customer service quality. As the leader makes price and qualitative changes, the competitors react on similar lines. However, the perception processes are different as regards the quality dimensions. Often, the new entrants use lower prices as their entry strategy. Price is publicly available and, hence, both customers and competing service-providers react quickly to price changes.

For instance, MTNL and BSNL, sitting on cash reserves, entered the cellular mobile market as third operators with aggressive pricing schemes. Reliance's success in getting more than five million subscribers is mainly because of aggressive entry prices.

In the case of infrastructure, as the risks associated with capital investment and technology upgradation are higher, the firms take more time to implement. Even after deciding to invest, mobilisation of resources, such as capital, manpower, technology and equipment, is a slow process. It takes time for the competitors to perceive and react to the infrastructure improvement of the leader. For example, the success of BSNL's CellOne service, which has emerged as the second largest cellular service in the country acquiring more than 4.5 million subscribers since its launch in October 2002, is not only due to aggressive pricing schemes but also extensive network coverage (especially in the B and C circles) and network availability.

The recent wave of mergers and acquisitions, such as Idea buying Escotel's operation/licence in six telecom circles, is to leverage the existing infrastructure and, hence, reduce the time to roll out services. Integrated players such as Bharti, Reliance and Tatas, which have licence and infrastructure across multiple services and service areas, have an edge over isolated players such as RPG or Spice, as they can provide better network coverage and interconnect facilities.

Improvement in customer service quality does not involve as much effort and resources compared to infrastructure development. The effect is visible in the marketplace and, hence, is perceived more quickly by subscribers and competitors than infrastructure quality. Poor customer service leads to a quick "churn" of subscribers towards competitors. However, it requires a change in employee mindset and commitment on the firm's part to practise customer service management. One is, at times, amazed to find that even dealers of private sector service-providers are not able to explain clearly the different tariff plans offered, and features of the handsets sold.

Though the cellular service segment was one of the earliest to go in for call centres and adopt customer relationship management programmes, the service quality is still far from the benchmark levels.

Despite low pricing schemes, MTNL's Dolphin cellular service did not take off as expected mainly because of poor quality along both the dimensions. Hence, competing in a market with 5-8 players requires a careful packaging of price, infrastructure and customer service quality.

Quality of Service (QoS) regulation notified by the Telecom Regulatory Authority of India (TRAI) in July 2000, had fixed certain benchmarks to be met by both basic and cellular mobile service providers for the subjective and objective quality parameters.

According to TRAI's April 21, 2004, report on QoS, most of the cellular service providers have shown improvements in their QoS offerings since the last survey. However, TRAI points out that there is room for improvement on certain parameters such as downtime of community isolation and billing complaints. The service is relatively poor in C circles where the service-providers are not deploying enough network capacity to meet the requirements. For example, four out of 10 operators do not meet the benchmark of 95 per cent for call success rates in C circles. Customers are also not happy with the help services.

The subjective customer survey points out that not a single cellular service provider met the overall service satisfaction benchmark level of 95 per cent. CDMA operators are no better. In fault incidence, billing complaint incidence and resolution, the CDMA service-providers lag behind. This is a cause for concern, as service providers seem to be interested just in acquiring customers and not in providing adequate QoS. It is time that the service providers focussed on the combined price and quality frontier to attain competitive advantage.

TRAI should not only continue to conduct periodic surveys of the quality parameters of the service providers, but also impose penalties for those not meeting the benchmark level of performance. What is the fun in having a mobile phone which does not connect to the network?

(The authors, respectively, are Professor, Management Development Institute, Gurgaon, and Fellow Programme student at IIM Lucknow.)

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