TELCOS' BIG MISCONCEPTION

[PAPUA NEW GUINEA CONTEXT]

The major telecommunication companies (telcos) in PNG are DataCo (data or bandwidth wholesaler), Telikom PNG, Digicel, and Bmobile-Vodafone who has now merged with the growing 4G LTE. There are also many other internet service providers (ISPs) in PNG whose focus are internet and data services (ISPs are not relevant to this article though).

Rumor has it that there's one or two more telcos soon to enter the market. And when that happens, customers could be the winners whilst the operators should be efficient and more competitive.

Currently, competition in PNG is tough with Digicel being aggressive in the mobile phone and mobile broadband services, taking advantage of its wider GSM network. Bmobile-Vodafone though small in size, sees positive signs of growth with 4G LTE now forms part of the business. Telikom PNG, though giving away its wholesale business and 4G LTE, is still leveraging the corporate sector with its fully dedicated and premium voice and data services on fibre optic technology.

Despite being in the fixed or wireless business, telcos' core services are voice and data. Voice service includes traditional phone calls and sms, whilst data service includes, internet based or online activities, whether private or public. There are also many other secondary services called Value-added services offered by telcos.

All these services are made possible by communication technology platforms and devices, ensuring customers access those services. Communication devices include fixed handsets, mobile phone handsets, routers, WiFi, other fixed or wireless broadband devices etc.

To put all these in perspective, telcos' primary focus should be on the voice and data services, not on the communication devices. Devices are not the end but the means!

For example, some GSM operators (or mobile phone companies) sell pricey mobile devices and counting their revenues on them without packaging with SIM and freebies. Others sell unlocked devices. What is important here is the SIM card, not the mobile device! They forget that revenue from sale of mobile devices are one-off, and not recurring. The recurring revenue comes from voice and data services via SIM card.

Oftentimes, more energy is wasted on selling devices and no constant focus is on voice and data services which messes up the objective of being a telco. Why worrying order expensive batch of fancy looking and costly devices? What core business are they in?

These days, there are host of dealers and retailers selling different ranges of smart phones and broadband devices and keep ordering the latest on the market. Let them worry about selling devices because they are good at it.

Devices are mediums of communication - for voice calls, sms, internet surfing, use of mobile Apps, and a list of other online acrivites. Without them, telecommunications services are not accessible. Telcos sell their voice and data services only through these mediums.

So what should they ideally do?

Here is a secret for telcos (especially GSM operators) to sustain business, avoid customer churn, increase subscribers and experience revenue growth. Telcos need a mentality shift from current sales and marketing practices. That is, more emphasis and focus should be on the sale of voice and data services. Device sale should be secondary but with a smarter strategy since they are mediums.

Firstly, they may consider selling the mobile devices at break-even or lower than landed cost with sims and bundled with some freebies. Fix the accounting treatment of the cost of devices and tie their return on investments to recurring airtime revenue over time. Perhaps, treat the costs as capital cost.

Secondly, devices must to locked to network to avoid churn. Prices must still be affordable to enjoy the recurring revenue.

Next, develop credit schemes and reach mutual agreements with companies and government departments to have employees buy devices and pay over a period of time. Payment defaults can be easily managed as long as agreement has been mutually reached.

Also, partner with device dealers and retailers to sell the SIM cards with their devices with free data or voice minutes and sms. Cut a small percentage off their selling price to make them more appetizing to customers. Why burning more on buying devices? Simply piggy back on what's already available.

Telcos need to understand the core of the business they are in and get the basics in perspective. Don't get swayed by advancement in mobile device techobolgies. Telcos are not in the business of selling mobile devices, they are in the business of selling voice and data services.