RI telecom market still ringing up interest
Telco economics are exceedingly complicated. Most billing systems are on average 13% inaccurate – in most cases this is on the customer side – customers are not charged for about 13% of calls. I know you will not believe me, but I can assure you it is true.
To complicate matters, infrastructure is a “sunk cost”. Once you have put up a mobile tower, its up. If one caller uses it, or 1 million callers use it, the cost is the same.
Add to this the tendency of prepaid users to “churn” from provider to provider, seemingly at random, and you have a recipe for disaster unless you have VERY good management.
OneTel in Australia suffered from all of the above, and went bankrupt!
The object of the exercise (although most people in the Telco industry refuse to accept it) is to have a maximum number of users, making the MINIMUM profit out of them, with worlds best practice financial controls. The logic is simple, it is better to make a consistent 1000 Rp profit a month out of 10 million customers, than to make 10,000 Rp profit a month out of 1 million customers. Because given the inability ot differentiate between Telco providers, most users will switch to the cheapest. And that means, all other things being equal, the one who makes the lowest profit per customer…..
To complicate matters, infrastructure is a “sunk cost”. Once you have put up a mobile tower, its up. If one caller uses it, or 1 million callers use it, the cost is the same.
Add to this the tendency of prepaid users to “churn” from provider to provider, seemingly at random, and you have a recipe for disaster unless you have VERY good management.
OneTel in Australia suffered from all of the above, and went bankrupt!
The object of the exercise (although most people in the Telco industry refuse to accept it) is to have a maximum number of users, making the MINIMUM profit out of them, with worlds best practice financial controls. The logic is simple, it is better to make a consistent 1000 Rp profit a month out of 10 million customers, than to make 10,000 Rp profit a month out of 1 million customers. Because given the inability ot differentiate between Telco providers, most users will switch to the cheapest. And that means, all other things being equal, the one who makes the lowest profit per customer…..