The Pay Per Second Billing Model: What Does It Hold?

The past month has seen some hectic activity in the Indian Telecom Sector. It’s amazing how a little competition always keeps everyone on their feet. Each business enterprise looking at the market as if through the eyes of a hawk for the next big business opportunity .Each company trying to seduce the prospective customer with its products. India, the future to be world’s largest mobile telephony market is now going through a massive upheaval. Market leaders no longer have it easy and with the introduction of the per second billing model, the competition has only gotten more cut throat.

Up until now we’ve seen various hashes and rehashes of the tariffs under the prepaid and post pay systems. Plan after plan requiring you to remember how much you’d have to pay if you spoke for a minute. How much to a phone using a rival’s network, how much for STD, how much for ISD, etc.

All that has changed with the entry of Tata Docomo in the Indian market.Docomo got the ball rolling by offering the per second model charging 1 paisa per second.

The competition and I mean everybody, absolutely everybody; Airtel, Vodafone, Reliance, BSNL, Idea Cellular, Aircel and the smaller operators too have now begun offering the pay/second model.

The activity in the TRAI (Telecom Regulatory Authority of India) offices with regard to this matter has taken place at lightning speed.

The recommendation has been passed approving the model and immediately the companies have launched the scheme to attract customers. Tata Docomo has barely had the time to blink at the success of their initial few weeks in the Indian markets!

In the short term this is a model which is going to hurt telecom operators with their revenue. As much as a 15-20% loss in revenue is expected as a result of the pay per second model. This isn’t my personal opinion but a consensus reached among many other analysts.

Brokerages are not happy with the telecom sector. The Indian market is saturated to a point and the pay per sec model cuts down revenue making the entire pack unattractive.

Considering the downturn in telecom in the past few weeks the introduction of the pay per sec model has led to a decline in telecom stocks.

Brokerages are unlikely to change their opinion on the telecom pack in the short /medium term. For them it is the success of the 3G services offered by private operators (which has not yet begun as the licenses are still in the auction stage) which is likely to determine their interest or re-interest in the Indian telecom pack. So don’t be surprised if your broker tells you that he thinks the telecom stocks are going to underperform in the short to medium term.

In the long term though this is a plan that should hold good for the customer. It gives him a lot more options and when enough are attracted by it the sheer volume will lead to a growth in revenue over the long run for the telecom companies.

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