Subscribers are Over-rated

All these years, I have heard a lot about how India is an awesome destination place for mobile application/product vendors because of the huge subscription base. The 50 million, 80 million subscriber base per service provider makes all vendors lick their lips thinking that if they can even take a 10-20% of that pie, they would make it big.In fact I have had the chance to review quite a few business plans which goes on the above surmise.

I have always been convinced, subscriber base means nothing in India. And the reason for that is because even though there are so many existing consumers and likelihood for even more in the future years, the problem is that the revenue per consumer is so less that even huge volumes do not mean a whole lot of profits. And I have been harping about this for a long time. Service providers DON'T pay upfront and the model widely used is managed services/revenue sharing, which means the cut that goes to each of the vendors involved in the overall solution is so less that sometimes it is even negligible.

This is the reason why you don't see a whole lot of Telecom product companies in India enroute to success. Yes there are the Jatayu Networks/Saskens of the world, but they are more the exception than the norm and I am making an educated guess that they survived because of their international orders and not because of local sales.

Today, Sunil Mittal, the chairman of Bharti Airtel has issued an interview where he says
the Indian Telecom sector has reached a stage where prices could not decline further and would only firm up in the future. I am one of the better users of Airtel ( I pay a huge monthly fee, make international calls, roam around a bit), yet my bill is still close to 40-50$. So think of the millions that have a cell-phone only for incoming calls (incoming calls are free in India) and pay a very nominal monthly fee. Bottom-line is when analysts take about the subscriber base in India, they would need to consider two kinds of bases. The one which gives a decent ARPU (Average revenue per user) and one which is dismal. That would give a more truthful picture.

At the same time,the only people who will benefit because of the huge volumes are those companies that are looking to load-test and benchmark their products.Nothing is as good as testing your product in live scenarios and if yours has withstood 80 million subscribers, it HAS to be good. India, sadly, as of today is more a testing ground than a viable market.

I believe the subscription rates are going to rise and that is good for the Telecom vendors/service providers. Not so good if you are merely a consumer.

Nortel's take on Cisco-Microsoft Partnership

Tehrani has posted Nortel’s Tony Rybczynski reaction on Microsoft-Cisco partnership. What it tells me is that Nortel is not concerned too much about the new found love between Cisco and Microsoft.

It stems from the fact that Steve Ballmer made it very clear that they were on the same page with Nortel and were natural partners. Must have something to do with talks about Microsoft making a bid at Nortel. I predict it's not going to be too long till we see a formal bid by Microsoft to buy Nortel!!!