Sunil Jain: Top of the pyramid

Thursday, January 22, 2009

Management guru CK Prahalad popularised the concept of the fortune at the bottom of the pyramid (BOP), and among others, the country’s top mobile phone players seem to be taking this quite seriously given how they?re wooing BOP customers. It is, however, not quite clear how this strategy will pay off.

According to a study by consulting firm BDA with chamber of commerce Ficci, the top 9 per cent of mobile phone users in India contribute 29 per cent to industry?s revenues and 45 per cent of profits; the next 20 per cent of subscribers contribute 44 per cent to revenues and 40 per cent to profits.

The lower end of the pyramid ? 71 per cent of subscribers ? contributes a mere 27 per cent to revenues and an even smaller 15 per cent to profits. With the collapse in average revenues per user (Arpu) expected to be staved off only with the introduction of 3G services which are to be used by the top 12-13 per cent of users, the bulk of the profit will continue to come from high-end users. Given this reality, and with number portability around the corner, the real battle has to be for the top-end customers.

Source: Business Standard (link opens in a new window)