AIRTEL MAGIC – SELLING A PRE-PAID CELLPHONE SERVICE
BACKGROUND NOTE
Cellular telephony was introduced in India during the
early 1990s. At that time, there were only two major private players, Bharti
(Airtel) and Essar (Essar) and both these companies offered only post-paid
services. Initially, the cellular services market registered limited growth.
This was primarily due to the high tariff rates charged by the companies
(about Rs 16 per minute for outgoing calls). Indians who were used to paying
much lesser amounts (Rs 1.20 for 3 minutes) for landline telephone calls
found these to be very expensive.
However, as there were only two players, a monopoly regime prevailed. The
tariff rates as well as the prices of cellular phone handsets (instrument)
available in that period continued to remain high. Hence, cellular phone
services during that period were regarded as a luxury and companies mostly
targeted the elite segment of the society. Moreover, these services were
mostly restricted to the metros. Other factors such as lack of awareness
among people, lack of infrastructural facilities, low standard of living,
and government regulations were also responsible for the slow growth of
cellular phone services in India.
Although the cellular services market in India grew during the late 1990s
(as the number of players increased and tariffs and handset prices came down
significantly) the growth was rather marginal. This was because the cellular
service providers offered only post-paid cellular services, which were still
perceived to be very costly as compared to landline communications.
Following this realization, the major cellular service providers in India,
launched pre-paid cellular services in the late 1990s. The main purpose of
these services was to target customers from all sections of society (unlike
post-paid services, which were targeted only at the premium segment). On
account of the benefits they offered (Refer Exhibit I), pre-paid cellular
card services gained quick popularity during the late 1990s.
Between the late 1990s and early 2000s, tariff rates declined 75%.
Reportedly, Indian cellular players were offering the lowest cellular
tariffs in the world (Rs 1.99 for 60 seconds). By October 2002, of the 8.5
million cellular phone users in the country, 65% belonged to the pre-paid
segment. Also, an estimated 80% of the new add-ons were pre-paid card
subscribers.
Bharti, being one of the early entrants in the industry, (Refer Exhibit II
for a note on Bharti), launched its own pre-paid cellular service under the
Magic brand in January 1999. Magic was first launched in Delhi and later in
other circles3 in India (where the company
offered cellular services under its flagship brand, Airtel).
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[3] India was divided into 21
‘telecom circles'(circles). These circles were divided into three
categories ‘A,'‘B,'and ‘C'based on their size and importance. Category
‘A'- Maharashtra, Gujarat, Andhra Pradesh, Karnataka and Tamil Nadu.
Category ‘B'- Kerala, Punjab, Haryana, Uttar Pradesh, Rajasthan, Madhya
Pradesh and West Bengal. Category ‘C'- Himachal Pradesh, Bihar, Orissa,
Assam and North East. Cellular licenses were separately issued to the four
metros in India – Delhi, Chennai, Mumbai and Kolkata. |
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Contents...
Casting The Celebrity Magic
Background Note
All Set To Create Magic
The Industry Strikes Back
The Future – Far From Magical
Questions For Discussion
Exhibit I
Exhibit II
Exhibit III
Exhibit IV
Cellular Service Subscriber Base In India
Additional Readings & References
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