PCO business - where is it heading to?

I was way too young in the eighties to understand the kind of socio-economic changes Sam Pitroda's telecom policy heralded then, even though the daily front-to-back reading of the The Statesman made me aware of the changes happening. Few years later when I left home to pursue my dream, the ubiquitous yellow booths by the roadside helped me understand the impact of the change brought in by the telecom man. By the nineties, every other rural house owned one of those yellow booths with PCO written in black, bold letters. That was their livelihood - a chance to get out of the crippling poverty cycle. And what a change that PCO revolution brought! If you look back, you will see how the PCO business mainstreamed the marginalised sections of the society, which included persons with disabilities.


I had left home to become a fighter pilot. From the cockpit of a Mirage or a MIG, the yellow specs (of what a booth would have looked like from high above) would never have been an important landmark in the pilot's screen. But if I were to know then that colour-blindness would eventually rob me of my dream, I would not have felt cheated. It is another matter that my aunt, who brought me up, still thinks that it is her fervent prayers to her God that quirked my fate and denied me my chance of flying one of the mean machines. She was ecstatic when I broke the news that I cannot join the Air Force on medical grounds! 


By the time I completed my MBA and stepped into the corporate world, telecom had become the new glam industry to work for. And I was one of the few first lucky ones to be absorbed by the industry. Now you know the Sam Pitroda angle, that shaped my career. And for good. Thank you "Uncle Sam".


A decade later in the new millennium I landed up in Afghanistan to market mobile phones. This time my aunt's prayers did not help. I think even her God understood my destiny. But how do you sell PCO in an ultra conservative, orthodox society, where the buyers of the service have to step out of their homes to avail of the facility? Especially for women who are forbidden to come in contact with a male stranger. And most PCO owners were men of youth, full of vigour and vitality. In the few cases, where women owned the PCO, how could she sell the service to strange males who would walk up to the kiosk? But globally, telecom companies have shown the spunk to innovate when the dice is down. Afghanistan is no exception.


The most dreaded war that broke out in Afghanistan solved most of the riddles. The war took out an entire generation of able bodied males. There are millions of families in Afghanistan who have no male members. It was a bullet or a bomb that claimed them. It did not matter to the families whose bullet did the job - Taliban's or NATO forces'. For they bore the brunt of abject poverty in the absence of an earning male member.  When faced with a no-choice situation, even religious or cultural strictures fail to clamp down the human spirit. Faced with poverty and the prospect of dying out of hunger, the mothers and the daughters found PCO as a saviour. At least it gave them a chance to live. Even if it meant that the young and beautiful daughters would never get a chance to get married. The conservative society would boycott them as they have broken one of the fundamental tenets of their religion. But look at the quirkiness - the war which brought them to the streets, also gave them the resolve to fight. Thanks to that change, you can find many Afghan girls enrolled in schools or even working in a corporate office. They had the disposable income to stand on their feet. They may not be married, but they live with dignity! You can even see widows ferrying SIM cards on the streets of Kabul. Telecom has surely revolutionised the lives of Afghan women.


That was then. Now with falling tariff and flooding of the market by cheap Chinese handsets, many are able to afford the mobile phones. Naturally, the PCO business is shrinking, and shrinking at a faster rate than what one could think of. We needed to innovate. Thus was born the Virtual PCO.


Virtual PCO enabled a PCO owner to have multiple virtual MSISDNs (mobile numbers) from one handset. So in effect, a PCO owner can distribute MSISDNs to multiple families who need not own a mobile connection. Just a handset can allow them to connect to the world outside! It is a win-win situation. It delivered few critical benefits:

1. It provided the PCO owner with a new revenue stream. A lifeline for a fast losing business.
2. It did away with the pain of the PCO business - where the user had to walk up to the nearest PCO kiosk to use the service. This service brought the service to the doorstep! It also diminished the chances of losing a life or a limb in a war-torn society!
3. For the customer, it meant that even without owning a mobile phone and a connection, he/she can make or receive calls from their home. Again, this product allowed the customers to decide when to use the service! It also conformed to the social norms!
4. Lastly, Virtual PCO allowed the customers to receive calls!

Needless to say, this product will redefine the market once again. And not only in Afghanistan, but across Africa & Latin America, where there are many millions who still cannot afford a mobile phone. For the PCO owner, its a windfall. He can make money through

1. Handset rental
2. Incoming call charges or a monthly rental for receiving calls
3. Outgoing call charges (as was earlier)

I strongly believe that this product will become a roaring success in the next few years, till the cycle turns on its head again! But we will be ready to innovate once again.

This brings me back to India. What will happen to the PCO business in India? The Afghanistan model will not work in India. India is far too telecom-developed for that solution. But I see a new trend emerging out of the 3G networks. 

It will take years for 3G handsets to capture a sizeable market share. Which means, the middle-of-the-pyramid and bottom-of-the-pyramid subscribers will not be able to afford 3G services in the near future. Even the cost of the 3G services will be a factor. This does not necessarily mean that these subscribers would not want to use the 3G services! As I mentioned in my previous article, even the poor has aspirations! 

I see PCO booths in India turning into mass video-calling centres. It will become Skype of the mobile industry! Imagine a mother from interior Kodungallur in Kerala whose son works in the Gulf! She is too ill-equipped to handle a 3G phone. But let her walk to the nearest PCO...and she will be thrilled to video-call her son! It is debatable at this stage whether the virtual model will work here in India.....only time will tell. I remember way back in the nineties, when I was working with BPL Mobile, we test marketed a product in which the users could use the text message facility on a virtual mass-market level. It was based on a subscription model. Though the response was good, the prohibitive cost of the SMS was a dampener. But the scenario has changed and India possibly will give a new definition to video-calling feature. Who knows how many more innovative ideas will be born in the coming years! 

Though the pang of never realising my dream of flying still pricks me now & then, I am a happy man marketing mobilephones. The experiences have been life-defining. I can say these experiences have helped me in becoming a better human being. At the end, that is what matters most!

   

And you thought bottom-of-the-pyramid customers give less revenue!

Telecom is revolutionising the world twice over, and Afghanistan is no exception. Even the battle-scarred, poverty-stricken, ultra-orthodox Afghanistan rings out nearly quarter of a million calls every minute. When I first landed up on the dusty roads of Kabul to head the marketing function of a telecom operator, I had no idea that the ride will be such an eventful one. Honestly, the first 48 hours were depressing, to say the least. I had nearly packed my bags back to Bangalore. But I stayed on......why I do not know till today. And now I don't want to know anymore. 

Afghanistan is in a difficult bind, for reasons beyond the war and destruction. Its in the psyche of the people, the common man, wherein lies the enormous challenge. If the wars have made the Afghans cynical, the political establishment has ditched them of the right to even live in dignity. As a marketer one tends to find the first footsteps in a new marketplace among the common man. I am no exception. I have to thank my previous bosses, who instilled these thoughts, rather etched them into my mind. If one boss insisted I be at the call centre @ 6 AM whenever I had launched a new product (just to ensure that the Product Manager supervised the first 100 calls...only then one would know if the communication was after all effective), another one ensured that the marketing brain toiled on the streets with the sales force to know the reality. But these experiences came to benefit me only when I grew a little wiser and started heading a functional role. And how I wish now that I can take back the curses I had hurled at them then! 

Let's get back to Afghanistan. Discipline is as alien to an Afghan as finding a Buddhist monk in Kandahar! Logic makes no logical sense to the common Afghan. Almost all Afghans have a pumpkin-sized ego. Illiteracy is so deep rooted that newspapers have a circulation of just 5000 odd copies! But Kyun-ki-saas-bhi-bahu-thi attracts 10 million eyeballs every episode! TV has such a stranglehold on the lives of Afghans that even a marriage ceremony is held-up for half an hour to allow the invitees/families of the bride & groom to watch Tulsi unleash her charm! Though they revel all things Indian, including the kitschy & provocative ads, they also  have built-since-birth double-standards ingrained within them. Try airing an ad showing a guy dancing (not even a girl, mind you) and you will have a dozen calls from mullahs, ministry of culture and others landing up on your cell. Of course not congratulatory ones, if you thought so! Or try launching CRBT (caller ring back tone) in Kandahar; the taliban will respond the next morning by blowing up a tower! But there is an even bigger problem! Its the ruling class - the half-educated moneyed egotists who surround the powers-to-be and impose their stunted views on the already subdued common man. So next time you watch a BBC report on a social taboo, you know who to blame.  

It's a challenge to be a marketer in this environment. All your wisdom gathered over the years get tested. As a marketer you get boxed from all sides. The challenge is to keep yourself motivated. Only then innovation will happen. And that's what we did against all odds. This article is a proof of the success we have achieved over the last year and a half.

Conventional wisdom would insist that revenue returns from bottom-of-the-pyramid customers are far less than other segments. Especially in Afghanistan, where the average man earns only $2/day. A chance encounter with a poor old lady up on the hills was the trigger. She treks 15 kms once a fortnight just to talk to her son who stays elsewhere. And she would have skipped many a meal to save up the money. By all standards, call tariff in Afghanistan is expensive - an average of 10 cents/minute. Add to that $20 for a handset, and you have many millions in Afghanistan, for whom affording a mobile phone still remains a dream. That encounter and the successful 'sachet' business model of Chic shampoo formed the basis of this new product. 

There are a few realities we accepted without a question:

1. That the customer is technology agnostic - they want the cheapest call tariff and the best network
2. That they never keep track of their MoU. In their minds, its only a budgeted amount that defines their usage. Complicated tariff plans only puts them off.
3. That prospective users are skeptical about the new deals from the telcos. Communications from telcos hide more than they reveal!
4. That customers are never loyal - they are driven by convenience, dread by committment and live by deals. Yet companies need to pamper customers. 

Thus was born 24 Azadi! A daily rental product, ala the 'sachet'.This product was aimed at daily wage earners who earn just about $2/day. Subscribers can re-charge on a daily basis by paying 50 cents. And they get 50 minutes of FREE talktime. They are not allowed to carry forward their unused talk-time to the next day. We followed these two principles in designing the product:

1. Do not bundle the tariff plan. 
2. Let the subscriber define his/her need

In less than 30 days we added more subscribers than what we normally add in 3 months. These subscribers give an ARPU (Average revenue per user) of 2 times more than what the entire portfolio gives! This is what happened:

1. on an average subscribers recharged for 19 days/month. That they were allowed to choose the days when they needed to make a call, was the clincher. They felt no longer dictated by the telecom companies' bundled tariff plans.
2. the subscribers could use their 50 minutes anytime during the day - no peak/off-peak hours to be kept in mind.

But why did the ARPU increase instead of decreasing? After all the subscribers were mostly from the bottom-of-the-pyramid segment? And the ARPU increase was more spectacular in this segment than in the migrated segment. 

Post launch research shows that subscribers felt relieved that for once they were given a FREE HAND to make a choice. Traditionally, telco marketers decide tariff plans with bundled features. And subscribers needed to fit their requirements with whatever was available off-the-shelf. The way 'sachet' changed the shampoo habits of the poor in India, 24 Azadi did the same for the poor in Afghanistan. All tariff plans in Afghanistan were designed keeping in mind the needs of the middle-class. The ARPU lift happened because the poor felt the need to communicate even beyond the FREE 50 on-net minutes. Once we were able to break the perception of the call cost, the volcano erupted! Un-bundling helped in this case. And thus, in Afghanistan, where the poorest of the poor resides, the ARPU of the bottom-of-the-pyramid subscribers is more than the other segments. The pent-up need to communicate overshot every other need. Even the need to remain within the prescribed social strictures. In Afghanistan, where social interaction is at a minimal due to cultural restrictions and avenues for entertainment are limited, mobile-phone became the outlet through which the poor explored the world beyond! If one goes by Maslow's theory, communication has become a basic need, even for the poor!

Since then, we have launched a top-end variant of the product to great success. And we had to stop sales for a few months to upgrade the system! Otherwise, the network was getting choked!  By the way my driver, Humayun, changed the mobile number of all his relatives to our network. So that they can maximise the benefit of 24 Azadi. I am sure there would be hundreds of other Humayuns who would have done the same!