Now that we understand that Operator revenues are decreasing in the growth proportion it is clear that Indian Telcos cannot look to operate at 35% plus EBIDTA levels. But what they must do is definitely cut down on their Operation Expenses.

While there is little that the operators can do to change their Licence & Spectrum Fees or influence their interconnect charges without regulatory intervention, what they can definitely do is take a relook at their Network/IT Costs, Employee Costs & Distribution Costs.

Again though the idea will be to cut down on these Costs the measurement parameters will always be linked to subscribers, minutes & in this case also network elements. Coming to network elements, one of the things that has happened by telcos unlocking value and forming Infrastructure companies to lease back the towers to them is that their Network OPEX/ site has become predictable. Would it not be prudent then to measure some of their achievements on a per site basis?

Subscribers Per Site has been a very discussed parameter. However from my previous blog it is clear that subscriber figures are not the best judge of an operator’s growth or performance in today’s world. His revenue is a pure function of Total Minutes on Network (TMN). So let us see how some of our established players measure on a per site basis on Subscribers & Minutes. Here we see some very different & characteristic numbers for each operator.

Airtel currently has a Subscribers Per Site (SPS) count of 1,116, R-Com with the CDMA advantage has 1,722 SPS, while Idea currently has an SPS of 919. The Minutes Per Site (MPS) value in Millions for Airtel, R-Com & Idea are respectively 1.44M, 1.69M & 0.99M. Clearly the higher the MPS value the lower would be the Network OPEX/ minute. 

If we take a look at the Overall OPEX (Calculated as Revenue – EBITDA) figures of these operators calculated on a Per Minute basis we see a similar pattern. Reliance has the lowest OPEX/ minute at 32 paisa, while Idea has the highest at 43paisa and Airtel’s OPEX/minute is 38 paisa.

While we compare the MPS factor it is also important to mention that though it seems to form a pattern with the OPEX/ minute it has a CDMA Vs GSM factor to consider on the Revenue Per Site (RPS) comparison. While R-Com has the highest MPS of 1.69 it has a lower RPS than Airtel. This is because it WARM is only 47 paisa – to understand this please read my previous Blog on Revenue Parameters.

Another thing to mention here is that the Overall OPEX (Revenue minus EBITDA) on a Per Site basis. This shows the overall efficiency of Operators on not only their Network OPEX but also on their Employee & Distribution costs. The overall OPEX Per Site (OPS) for Airtel, R-Com & Idea are respectively 1.84 Lacs, 1.79 Lacs & 1.41 Lacs. Here we see Idea having the lowest OPS.

Few of the things that operators need to focus on to improve these performance parameters is to see how they can pack more MPS and reduce OPS. The others is also to reduce their Employee costs & Distribution costs.

Talking about these costs Airtel has done amazingly well through a series of decisions. Their network OPEX is outsourced to Ericsson & NSN, their IT is outsourced on an innovative Revenue Share agreement to IBM, their Call Centres are outsourced on a per seat & per minute agreement. All this gives them a very good handle on their OPEX costs allowing them to work towards increasing efficiency through defined SLA parameters.

Another good thing that Airtel has done is that for their distribution (and BTW they have over 1 Million retail outlets to distribute to, more than anyone else) they have removed the Super-distributor model. All their distributors contact them directly through their CRM module managed by IBM. Though this means that they have hundreds of distributors in each circle and thousands in the country directly being managed by them they have increased efficiency through automation and reduced a significant step in the distribution chain making them more competitive in the market and helping them save revenues.

I soon plan to write a series blogs on ways in which OPEX efficiency can be achieved to address all these factors. The first of them is already in my head on ways in which more MPS can be achieved.