In a recent blog post I asked whether Indian telcos would be exposed to the same disruptive challenges as telcos in Western economies. Fashionably referred to as “disintermediation”, this is when a new business cuts into your market and takes away some or all of the value you currently derive from it.
Example? I download a song today from my friendly telco apps store, accessed via my mobile phone. I pay for the music by having the purchase price deducted from my pre-paid account. My mobile service provider forwards the due portion of my payment to the music vendor, and keeps the rest for itself to cover its costs and retain a revenue share upside on top. Now a new development takes place that “disintermediates” the mobile operator’s value chain: I obtain a credit card and buy an iPhone. I link my credit card to my iPhone account online and start buying music from iTunes. Every time I buy music Apple charges my credit card, pays off the music vendor, and keeps the rest for itself. Suddenly the mobile service provider has been disintermediated, and gains nothing from this particular revenue source.
While disintermediation is already a major concern for mobile operators in the West, there are two reasons why it is not likely to be an immediate threat in India:
Even though disintermediation may initially have a soft landing in India, it will ultimately come at a high price. The rise of smart phones in India will coincide with the rise in banking access and EFT and by 2017 we can expect both to be scaling rapidly. This means that all of a sudden there could be an increase in mCommerce which takes place outside the operator’s billing system. Added to that, India is now a big market, being the world’s 10th largest economy by nominal GDP and with telecom industry revenues (circa $25bn) as large as that of Germany or the UK. Even though there is limited mCommerce activity today, the Indian market will soon increasingly interest major internet players with mobile commerce divisions.
Operators have the potential to play a sustained role by being “smarter” pipes:
To provide this type of value within five years, the industry has to start here and now.
The thoughts and opinions shared here are of the author.
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