Mobile Services Retailing – No more Lucrative

Our team undertook ground visit over the past few days to get an update on the tariff/competitive situation. On the operator front, the tariffs have remained stable or have risen. However, we were surprised to find out that the Mobile Services Retailer being unhappy as a consequence of over 150% penetration of Mobile Services in Urban India.

With a spectrum policy that rewarded operators with additional spectrum for showing higher subscriber numbers, mobile operators focused on aggressive SIM sales. Operators accepted this cost in the race for subscribers. In the process, the distribution channel prospered.

Our checks with stores over the last couple of days show that while the commission level continues to stay at Rs35, the retailers are being impacted by other means. Ever since the channel commissions went down, payments to retailers from the distributors (middlemen) have slowed down drastically.

Most leading operators have changed their channel commission systems and started paying the retailers directly (through talktime currency delivered electronically), thus bypassing the middlemen. From this we conclude that the distributors (who themselves are seeing fallingĀ  commissions) were squeezing out the retailers – leading to delayed payments (though operators were paying distributors on time).

Further, another stream of revenues for shopkeepers is the rental paid by operators for placing their banners in the stores (a large banner at the entrance could easily cost the operator Rs3,000-5,000 per month in a place like Mumbai). Shopkeepers complained that over the past few months, rental payments for banners from operators have become irregular, and even stopped completely in case of some new operators.

In light of these issues, one shopkeeper we met even commented that he is thinking of closing down his mobile services business and starting something else.

Author: Webmaster