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RCOM to introduce sachet pricing to drive VAS usage volumes

CHANDIGARH, JUNE 25, 2009 --- Reliance Communications is planning to enhance its VAS usage significantly amongst subscribers by overhauling its plain pricing model. The company is moving away from its monthly consolidated subscription pricing module to a more shredded subscription module. The company is introducing a host of sachet pricing plans for its various VAS offerings. This effort has paid rich dividends in the gaming services & now the company is extending the strategy across its entire VAS services.

Once a subscriber procures a particular VAS application, the company’s sachet pricing strategy would involve splitting the entire subscription of the VAS application into a day plan or a view plan (as applicable to the VAS application). For instance, the monthly subscription of caller tune at Rs 30 would be replaced by a sachet strategy of Re 1/day pricing module offering flexibility of usage to the subscriber.

The biggest upside of the sachet pricing plan would be felt by the prepaid subscriber base of the company. The prepaid users form nearly 85% of the overall wireless subscriber base standing at over 68 million across the GSM and CDMA networks.

RCOM’s sachet pricing module for VAS has been developed keeping in view that a prepaid user would need the prepaid balance for talk time & SMS at any given point in time. The sachet pricing of RCOM VAS offerings e.g. caller tunes would enable reduction of the initial subscription load from the current drain of Rs 30 to a new subscription drain of Re 1 only post the implementation of sachet subscription pricing plan.

RCOM expects its sachet subscription module to generate a substantial upside on both volumes as well as revenues. Sachet pricing model lowers the entry price it results in a higher number of successful renewals. Given the fact that Indian telecom industry is gaining rural subscribers; sachet pricing model would help in providing premium service at affordable rate to these customers.

As a business strategy, the sachet strategy would enable RCOM to target a wider range of customers in the Rs 2+ balance range. This would also increase the penetration of VAS in the subscriber base of RCOM.

Sachet strategy is expected to give a big boost to VAS usage because it reduces the threshold balance to subscribe to the service. Overall revenues will increase proportionally from increased subscriber count. Initially due to reduced price points the VAS ARPUs may grow immediately. However, since the VAS adoption will grow multifold given the lower entry price, the subsequent months will ensure large revenue growth,said Mr Krishna Durbha, Head - VAS, Reliance Communications.

On VAS front, RCOM has been very forward looking in terms its offerings in the CDMA space. The company continues to extend the same to GSM as well. The revenue contribution from these services in CDMA has been at par or more than what we are seeing in the Indian market, added Mr Durbha.

The Indian youth who use SMS heavily are also high on the fashion quotient on the handset. With the launch of its GSM services on a nationwide basis RCOM will be able to tap into this very large, profitable SMS market segment. In addition, it will be able to leverage the rich handset capability available in the GSM ecosystem for other value added services. RCOM also sees a huge opportunity in the smart phone segment and M-commerce space in addition to the entertainment space, Mr Durbha further said.

There are several initiatives RCOM is working on which should fructify this year. With these initiatives the company target to achieve 15% to 20% of our revenue contribution coming from VAS and Data services.

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