Impact of 1 Paisa Plan on Telecom Sector

A Study On The Impact of 1 paisa pulse on the Consumer Preference

Project Done By:

Sudarshan.D (09MBA017)

Manikandan.A (09MBA028)

Santosh Shankar (09MBA047)

Table Of Contents:

Serial No. | Title | Page No. |

1 | Introduction | 3 |

2 | Review Of Literature | 7 |

3 | Methodology | 8 |

4 | Results | 9 |

5 | Findings | 22 |

6 | Conclusion | 23 |

7 | Bibliography | 24 |

1. Introduction

1.1 The Telecommunication Industry -Wireless Communication:

India has a population of around 1,174,040,000 with around 525,147,922 mobile users which accounts for 44.70% of the population. It is only behind China in the number of mobile phone connections. It has the highest growth rate, with 16.67 million new customers added every month and is expected to cross the 'billion' barrier by the year 2015. It has also been estimated that India will overtake China in the next 10 years thereby becoming the country with the largest number of mobile phone users. This future growth will be possible if the present players focus on the Indian rural market. This is because the urban market is almost saturated whereas the teledensity of the rural areas and smaller towns is still at around 12-14%. This window has to be tapped by the service providers so as to reach the estimate growth of 'a billion' users by the year 2015.

The above acknowledged growth can be attributed to the large population with an expanding income and increased spending pattern and the efforts of the governmental and non-governmental agencies for enhancing the infrastructure needed to support this growth.

The mobile services in India are provided by both the technologies, GSM (Global System for mobile communication) and CDMA (Code-Division Multiple Access). The major players in this sector are:

OPERATOR | TECHNOLOGY | SUBSCRIBERS(in Millions) |

Airtel | GSM | 116.16 |

Reliance Communication | CDMA | 88.93 |

Vodafone Essar | GSM | 85.83 |

BSNL | GSM & CDMA | 53.96 |

Idea Cellular | GSM | 53.35 |

Tata Indicom | GSM & CDMA | 51.73 |

Aircel | GSM | 27.75 |

MTNL | GSM | 4.43 |

MTS India | GSM & CDMA | 2.37 |

Loop Mobile | GSM | 1.94 |

Ping Mobile | GSM | 0.38 |

Virgin Mobile India | CDMA/GSM | Unknown |

Uninor | GSM | Unknown |

S Tel | GSM | Unknown |

1.2 Need For Study:

The call rates in India are already among the lowest in the world. This is due to the presence of various domestic and international players in the sector. These call rates have been driven further down by companies that want to attract new customers and capture the market. A severe price competition was triggered when Tata DoCoMo introduced a path breaking offer to bill customers on a second basis instead of the traditional per minute basis. This forced the other players to reduce their tariffs in order to protect their market shares. The reduction of prices had a direct impact on the revenues of the whole telecommunication sector.

1.3 Research Questions:

The researcher will be looking to answer the following questions at the end of this research:

I. The factors that consumers consider while buying a new connection?

II. How long did they wait before switching to the new scheme?

III. The impact of 1 paisa pulse on the SMS.

IV. Did it increase the number of calls made?

1.4 Research Objective:

By answering the above questions, the researcher would like to truly understand the impact of the introduction of '1 paisa pulse' on the consumer preferences and behavior.

2. Review of Literature:

When Tata DoCoMo came out with the 1paisa pulse, the TRAI (Telephone Regulation Authority of India) planned to make per-second billing for all the service providers from the existing per-minute billing scheme. Though there has been no time frame set for this implementation.

Pricing and its impact: The reduction in prices has a direct impact on the customers of a product and in general the industry. The low priced Tata DoCoMo created a stir in the Telecommunication Industry with the ripples affecting all the major players of the sector.

There is a clear indication that the 1paisa pulse has impacted the Indian Telecommunication Industry. This is further confirmed by the fact that the ARPU (Average Revenue per User) has decreased by a substantial amount of about 9% for the market leader Airtel. This and other factors combined have resulted in Airtel posting just 2.3% growth rate in the third quarter that ended on 31st December 2009. This is just a small indication of the influence of the 1 paisa pulse on the Telecommunication industry.

The above factors have created a curiosity in the researcher to further study the impact of the 1 paisa pulse on the entire Telecommunication industry. The impact on the players can only be known in the near future but the impact on the consumer's preferences and behavior.

3. Methodology:

4.1 Research Design

The researcher has undertaken a causal study to learn about the implications of an innovative tariff offered by Tata DoCoMo. By this the researcher intends to explore the changes in the consumer behavior and penchant while buying a mobile connection.