Prospects Upbeat For Mobile Services Distribution Market In India: Frost & Sullivan

Explosive growth in the Indian mobile services market is enlivening prospects for distribution partners that are assisting mobile service providers (MSPs) operating in this space. To reach out to customers, MSPs use nearly 2.1 million outlets/ shops, which range from simple pan shops and kiranas to sophisticated showrooms and supermarkets. With the Indian market seeing eight to 10 mobile service providers per telecom circle, the pressure on the existing channels of distribution has intensified considerably.

The MSPs and the intermediaries in the chain are devising smart strategies to serve customers amicably. There is an accelerated attempt toward penetrating the market and reaching out to customers in a location of maximum convenience.

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New analysis from Frost & Sullivan, Distribution is KING in Mobile Service, finds that the market earned revenues of Rs 4,074 billion in 2008-09 and estimates this to reach Rs 5,033 in 2014-15.

“The Indian government is avidly promoting mobile services, especially rural telephony, and the regulatory push has provided forward momentum for the market,” says Frost & Sullivan Senior Research Analyst Samarth Narayan. “The inclusion of the rural population in the mobile services growth story has necessitated newer channels of distribution and innovative ways of ensuring availability in far-flung rural locations.”

New avenues for market penetration are opening up for MSPs, thereby helping them to connect to wider geographical areas. However, the geographical spread of the Indian towns and poor infrastructure are major challenges for participants in the mobile services value chain.

Although the rural population is poised to drive the next phase of subscriber additions, poverty and low affordability remain major roadblocks. Electricity problems in the rural areas are further complicating matters. Financial inclusion will see more of the rural population becoming a part of mainstream business.

In the absence of a nation-wide organised distribution chain, MSPs have to route their services to market through a maze of channels. This has made the Indian market one of the most challenging markets for distribution of mobile services. Evidence points to a greater lack of control as the service progresses down the value chain. The flow of information and hence, the control over the mode of distribution of services is always under jeopardy from a MSP standpoint.

Arbitration issues in the distribution chain have affected the consistency and efficiency of the distribution mechanism. Due to the unorganised nature of the market, higher commission rates go to distributors. MSPs need to ensure sound distribution mechanisms with effective information flow in the chain to ensure maximum customer satisfaction, and thereby induce loyalty in a mobile services market, where customers are highly spoilt with choices.

To improve business prospects, mobile service providers need to partner with distributors, who have good investment capability, coupled with a fair amount of technical competence and knowledge of the local market. This is even more important for the newer MSPs, who today have to set-up a robust distribution system for profitable operations.

“The road ahead for effective distribution is leveraging the online/ mobile channels as well as working toward a nation-wide organised distribution chain,” says Narayan. “With the able support of the government and synergy between the participants in the mobile services chain, the infrastructure challenges faced can be overcome effectively, thereby ensuring a well-oiled distribution system.”