Showing posts with label telecom. Show all posts
Showing posts with label telecom. Show all posts

Saturday, June 23, 2012

The (Social?) Enterprise

Social is a wanton word which seems to get hooked with many other otherwise normal words, reducing them to mere clichés. Enterprise, I believe, has been its most famous victim. 

What is an enterprise? Let me shrug dictionary definitions and think of the images that the word conjures up in my mind. I see a tea-stall by the road-side, with a rickety bench and a perpetually running heater sitting under an infinite supply of hot water, tea leaves and milk. The person who runs it might most probably be owning it as well. This enterprise sells a rejuvenating cuppa tea to a bunch of people who seem to cling on to the cheap cup for as long as they could.  The customers it serves. The owner probably returns home and does his bit for running his/ her family. He/ she would also interact with the neighborhood 'kirana' store for a supply of sugar, tea and milk. The vendors. Even the simplest form of enterprises are about an ecosystem, about inter-dependence, sustenance and growth. Maximizing shareholders' value. Delivering genuine or perceived needs of its customers. It is inherently social.

Another image that comes to my mind is the telecom enterprise. A vast array of professionals, equipment and software that run a myriad maze of departments, directly employing thousands, some sections run by other vendors- themselves large organizations, also armies of handset and equipment manufacturers... Their aim, making a person A take out a box from the pocket and communicate with a person B, or even the world at large. The customers it serves. What is unseen is the millions it indirectly empowers. The major operators in India today sell their talk-time through a network of around two million retail outlets. Massive ecosystems that have literally spawned economic activities that simply did not even exists in peoples' imagination even a decade ago! Amazing. Maximizing shareholders' value. Delivering genuine or perceived needs of its customers. Even this is inherently and massively social.

Now, imagine the words 'social work'. What image does this bring up? Do you see the telecom operator as a social worker? Or the tea-stall owner? Why not? Why does someone like Anna Hazaare sound more a 'social worker' than say, Sunil Bharti Mittal? One could argue, that this perception is because of a perception of 'selflessness' of the promoters/ protagonists or the size of the 'cause'. But isn't that a flawed metric and a flawed perception? While 'social' is about the network and the general good that results and about how many people the network affects and not about the first node that spawned it or the center node. Its about the branches and the fruits and rarely about what the seed has become or aspires for itself. Sure, if the seed just bloats itself up into a giant seed with no branches, no fruits, no nothing- that is a genuinely fraudulent, useless and a non-enterprise seed (and must be destroyed). But that seed is so against the basic nature of a seed! Seeds and entrepreneurs must literally give themselves up for the enterprise so much that they no longer resemble the tiny round seeds they were, their old identities die with the birth of their enterprises. Their growth and identity becomes synonymous with their enterprises. I don't see anything wrong with that, infact I think that is very right. That's the law of nature which must be more right than laws made by us.

So, my hypothesis is that the word social is redundant in-front of the word enterprise. It leads to connotations and perceptions that perhaps hide the greatest social workers among us and highlight just the loud, visually jarring ones. To denote enterprises that are genuinely in the act of general bad as opposed to general good, lets boldly call them 'anti-social enterprises' - because they are. 


Now that brings a dilemma, would a mining company that delivers economic development for the country, generates profits and maximizes shareholder value while destroying the local ecology qualify as a (social) enterprise or as an anti-social one? Or, what about the enterprise that manufactures cigarettes ('nicotine delivery devices'- The Insider)? It employs a lot of people and empowers thousands of tobacco farmers while also becoming a cause for cancer for its customers. Is this a social enterprise? Or what about weapons manufacturers? Is the simple word 'enterprise' required for describing these middle-ground ventures with ambiguous leanings? Perhaps when these industries were formed, the benefits far outweighed the then understood ill-effects? Maybe. I am not sure. Maybe, telecom will become tomorrow's tobacco and folks will be blogging (if that would still be in fashion) about its ambiguous leanings then ;). 


For now, for the sake of simplicity, let me suggest that if the ill-effects due to an enterprise are well known, documented and proven, we must simply acknowledge them as 'anti-social enterprises'. Enterprises must not result in threatening Life itself. Simply because 'life' is still something we have not been able to understand, leave alone the power to replace. It is THE most precious thing. 

But till then, lets deprecate the term 'social enterprise' with just 'enterprise'. That sounds more natural and real. And if tomorrow reveals something new, we just need to be open enough to listen and learn (and maybe reclassify ;-).

Three cheers to the enterprises!

Saturday, August 18, 2007

ARPUs don't lie

This post is a part of my research into the Indian mobile content market - a general 'state of affairs' estimation relying on ARPU figures.

Disclaimer: All calculations here represent my personal estimation based on plain high school maths, figures available on the net (as in Q1 2007) and certain assumptions, which may NOT be accurate :)

VAS: Value Added Services
ARPU: Average Revenue Per User (per month)
COAI: Cellular Operators Association of India
IAMAI: Internet and Mobile Association of India



Starting Assumptions


Indian GSM subscriber base
= 135 million (COAI)

ARPU, Avg. Rev. Per User
= Rs. 300 (rounded)

%, VAS Revenues
= 10 (IAMAI)

%, SMS contributing VAS Revenues
= 55 (so remaining 45% has ringtones, CRBT, wallpapers, games, apps, mms...)

%, Games and data contribution to VAS Revenues
= 7

%, VAS operator rev. share
= 60 (remaining split between developer and aggregator)

%, Revenue share, developer (from what an aggregator gets)
= 40

%, Postpaid of subscriber base
= 20 (IAMAI)

%, Postpaid customers revenue contribution
= 80


Calculations, Non SMS VAS ARPU

Therefore,

VAS ARPU
= (10% x Rs.300)
= Rs. 30

Non-SMS ARPU
= (45% x Rs.30)
= Rs. 13.5



Calculations Non SMS VAS Revenues

Therefore,

VAS 'Market' including telcos share
= (Subscribers x VAS ARPU)
= Rs. 4.95 billion

VAS Aggregator Revenues,
= (Subscribers x Non-SMS ARPU x Aggregators Rev Share)
= Rs. 891 million a month
= Rs. 89 crore (1068 crore annual)

VAS Developers' Revenues,
= 40% x Aggregator revenues
= Rs. 356 million
= Rs. 35.6 crore (427 crore annual)

Game developers' Revenues,
= (15.5 % x VAS Developers' Revenues)
= Rs. 55.8 million
= Rs. 5.58 crore (67 crore annual)



Twisted Analysis


1. How much does an Indian mobile consumer actually spend?

Assuming that post and pre-paid spending ratio applies to VAS as well,
(Since 20% post-paid subscribers make 80% of revenues)
33 million subscribers contribute Rs. 3.96 billion VAS revenues per month

Excluding SMS share,
33 million subscribers spend Rs. 1.78 billion a month
Therefore, on an average, a post-paid user spends Rs. 54 a month on VAS excluding SMS.

There is one catch though! all these services require GPRS and it would not be fair to assume that all the post-paid subscribers would also be GPRS subscribers.

Assuming that only 20% of the post-paid subscribers are active GPRS users,
6.6 million post-paid GPRS subscribers spend Rs. 1.78 billion on VAS per month.
Therefore, an active GPRS user spends Rs. 270 per month on VAS.

Now, there is another caveat, GPRS by itself attracts a 'fee' for most subscribers, a few operators do provide pay-per-KB data transfer plan. (Airtel, for instance has a Rs.250 per month plan and a Rs.1500 per year plan) Still, I think it would be safe to assume that 40% of this customer spend goes towards paying for 'data' and that leaves an actual spend of close to Rs. 165 on actual 'buying' digital content per month?

2. Where is the moolah flowing?

Riding on the sheer volume of users, the telecos are building up their kitty by the virtue of owning the pipe and controlling the gates.
The next in line are the aggregators. India has the following major aggregators, there might be a few more:

IMI Mobile - Good operator tie-ups
OnMobile - IVRS leaders
Mauj - Good portfolio
Indiagames - Relatively recent shift of focus on aggregation
Indiatimes - Portal.

They'd make 60% of VAS Aggregator Revenues (after paying out developers/ rights owners). Put together, their revenues would be close to Rs. 50 crore a month.

Now come the developers, ringtone, wallpaper, game, app providers put together. Logically they'd get as their share whatever is left after the operator and aggregator takes, which would be 40% of VAS Aggregator Revenues close to Rs. 35 crore a month.

The only problem is, there are hundreds of fingers in this pie. A cursory glance at the portals will give a good picture at the enormous selection of content available. While a good percentage of such content comprises of scaled down bollywood/hollywood posters, trailers, screenshots and ringtones, the next major set of content providers are global studios. Then come relatively obscure studios, including many Indian content developers.

The pan-Indian mobile content shelf:
_______________________________
Item: Tones | Images | Games Apps
_______________________________
Share: 78% | 7% | 15%
Rev: 27.3 cr | 2.45 cr | 5.25 cr

Active: 5000 | 2000 | 500

Avg revenue per item for a developer
Tones
= Rs. 5,460
Image
= Rs 12, 250
Game and app
= Rs. 1,05,000

However, an 'average' can be misleading, since what really happens is that the downloads are heavily skewed in the favor of top 10 to 20 content items, the rest of the items together might constitute just 10% of the total downloads.

3. Is developing content really worth the time and effort?

To get a perspective on these figures, let me take the case of games and apps since these would be the most resource intensive. A good 'visible' game or app could thus make $2,500 or close to $6,000 over its Indian shelf-life. So, for an developer investing at least four months worth of team effort in developing an international class product exclusively for the Indian market, is a high risk. The other alternative is to make a lot of low-quality quick games - one might just about break even with such glut!

The only reason why someone would consider this market is its sheer size and 'potential'. So those with deep pockets spend to build the brand and be ready 'when the time comes'. Also, most content items have a global appeal. India can just be one of the many spokes in the developer's distribution wheel.

Another word of caution: These figures lead me to believe that there is a 'revenue leak' somewhere in the chain. The 'numbers' passed down to the content developers rarely come even close to our estimates. Perhaps some members of the Content Providers community could comment on this?

Also, I might have made mistakes, logical or arithmetic in my calculations - please point them out. Baseline- ARPUs dont lie!