Network Quality More Important For Indians, But Service Providers Lost In Price Wars: Nielsen

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Biswarup Banerjee;

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NETWORK QUALITY MORE IMPORTANT FOR INDIANS, BUT SERVICE PROVIDERS LOST IN PRICE WARS: NIELSEN

Significant Advertising Opportunity Exists for Service Providers with Best Network

Reliance Number One in Network Reliability in Three Circles, TATA in One

Mumbai, November 16, 2009: Network quality is the most important consideration for Indians when it comes to selecting a Service Provider. But the fact is Indians don’t really know which Service Provider has the best Network in their circle, all they know or to be more precise are told by the Service Providers is how much lower their prices are when compared to the competition. Reliance is the Number One Service Provider in Network Reliability in Andhra Pradesh, Madhya Pradesh and Tamil Nadu, while TATA takes the Number One position in Uttar Pradesh. But does anyone know that?

The Nielsen Company, the world leader in benchmarking wireless and wireline network performance, has announced the results from its continuous network benchmarking program in India called – “Nielsen Consumer Experience Mobile Test Program.” The program measures wireless network performance for all national and select regional Service Providers in markets covering a population of nearly 100 million people across the country.

Nielsen launched this syndicated, one-of-a-kind Nielsen Consumer Experience Mobile Test Program in India in August 2008, bringing over ten years of industry experience from North America where the program is subscribed to by all US Wireless Service Providers and has a currency status in the Industry. The program tests and reports the performance and quality of the top six Service Providers in numerous markets across India testing both Voice and Data networks. The objective is to provide an independent, unbiased, third-party view of network performance along with consumer’s perception of Service Providers.

Nielsen Consumer Experience Mobile Test Program in India shows that there is a huge disconnect between what is important to consumers vs. what is being focused on by Service Providers. It shows that even though network quality is a more important criterion than price, price war between Service Providers has become customer acquisition tool. Due to this lack of information and communication consumers don’t know who the market leaders are in network quality in their circle and are compelled to make choices based on their perception of supremacy. The result, market shares in India do not follow network superiority because leading Service Providers have failed to advertise this information to the Indian consumer.

In markets such as North America, a Network Leader has emerged due to clear network superiority. The lead in market share follows the lead in network performance. Both Verizon and AT&T have spent about $360M last year advertising on network claims.

The story in India is hugely different. Nielsen’s Consumer Experience Mobile Test Program results indicate that out of 18 circles tested on Reliability metric a clear “Leader” exists in just four circles and in ten out of eighteen circles tested, there is a tie for first place for Network Reliability. In the remaining four circles, there is neither a clear leader, nor a tie for first position. See Table 1. The table also demonstrates that in India the leader in market share does not follow the lead in network performance.

“As Indian consumers consider network performance as a major selection and retention criterion, there is a huge opportunity for network leaders to educate consumers about the superiority of their network performance to gain subscriber base. This can be a huge marketing differentiator in an industry that is reeling under hyper competition,” said Shankari Panchapakesan, Executive Director, Telecom Practice, The Nielsen Company.

Network leaders but not market leaders                        

The Telecom sector in India has a scarcity of spectrum and the hyper competition in the sector has resulted in networks whose performance has not kept up with demand. To gain market share Service Providers resorted to price wars and reduced their tariffs to such an extent that today India has the lowest ARPUs in the world. This price war coupled with the huge budgets allocated to advertising has resulted in an explosion in the subscriber base. Ironically, it reflects a phenomenon where the market share does not necessarily follow network performance as demonstrated in Table 1.

The wireless market potential in India is second only to China and is rapidly threatening to overtake it. The Indian wireless market is one of the world’s most competitive, with 12 Service Providers across 23 wireless “circles” and six to eight competing Service Providers in each circle. Competition in Indian telecom market is expected to intensify further following the commencement of services by new UASL holders, the auction of new 3G licenses and the introduction of mobile number portability (MNP).

“The Indian Service Providers are in a frenzy to capture market share as quickly as possible. Thus, new Service Providers will find it difficult to gain market share in the crowded wireless market. They will face challenges in terms of high subscriber acquisition costs, lower ARPU customers and lack of adequate spectrum quality. Getting superior network quality and communicating the same to the consumers will prove helpful,” said Panchapakesan.

The consumer angle

The Indian mobile subscriber is rapidly evolving into a mature subscriber who can discriminate on the basis of superior network. This is evident from Nielsen’s Mobile Consumer Insights survey, which indicates that network satisfaction is driving overall satisfaction with services, offered by the Service Providers and has increased from 50 percent in the latter half of 2008 to 54 percent in the first half of 2009. Similar to other parts of the world, in India too a network ‘Leader’ will emerge based on superiority in network performance. As the average Indian subscriber becomes more and more discerning and network experience and word of mouth make their impact, we will see market share follow the “network”.

Nielsen Consumer Experience Mobile Test Program data, which gauges network performance across 18 markets, has been integrated with its Mobile Consumer Insights data to understand customer perception of a Service Provider against its actual network performance. The results for the same vary across markets and Service Providers. See Table 2.

Table 2 shows that Service Provider 1 in most of the markets seems to have a perception which is consistent with its actual performance. However, Service Provider 4’s actual coverage performance ‘overhangs’ consumer perception of the same. Hence, this Service Provider should prioritize investment in its marketing and communication efforts. Service Provider 5, on the other hand, is in a situation where consumer perception of coverage overhangs actual coverage performance. This Service Provider should prioritize investment in network build-out over marketing and communication efforts.

About Nielsen Consumer Experience Mobile Test Program

Nielsen Consumer Experience Mobile Test Program network quality research is an unbiased, third-party measurement of mobile networks, uninfluenced by any Service Provider/ entity and is designed at a level of scale and scope that is unparalleled in India. Every aspect of the program is methodology-driven including drive route selection and scoring of Voice Quality, ensuring all networks are tested on par.

Sophisticated benchmarking equipment with handsets mounted inside vans continuously drive pre-determined roads. These test handsets are programmatically set-up to make calls on Service Providers’ networks. The ensuing call events, coverage, call quality and other network parameters are logged on to files. These files are post-processed using Nielsen proprietary software to create competitive network benchmarking reports.

Nielsen supports and augments its benchmarking program with actual customer surveys that measure perceived customer satisfaction, across many areas. Nielsen Mobile Consumer Insight surveys respondents across a number of satisfaction metrics that include overall satisfaction, willingness to recommend and reasons for Service Provider’s choice.

About The Nielsen Company

The Nielsen Company is a global information and media company with leading market positions in marketing and consumer information, television and other media measurement, online intelligence, mobile measurement, trade shows and business publications (Billboard, The Hollywood Reporter, Adweek). The privately held company is active in more than 100 countries, with headquarters in New York, USA. For more information, please visit, www.nielsen.com

Table 1: Circles tested by Nielsen show if a clear rank #1 or tie exists for Reliability metrics across top 6 Service Providers tested in each circle

* Source: COAI & AUSPI July’09 Published Figures    

Table 2: Actual Coverage performance across 18 markets mapped for 6 Service Providers’ vis-à-vis its consumer perception on coverage as a network parameter

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