Virendra had just moved in as Head of Wireline Broadband (DSL) business in one of the challenger circles for Wireline Broadband (DSL). Although, by revenue it was a decent sized business for Wireline Broadband (DSL) in the circle, this was not an early circle of Wireline Broadband (DSL). Hence there was not statewide coverage. Only select towns were covered. Out of the top ten towns of the state, the capital was covered and another six cities were covered. Three top towns in terms of population were not covered. Even in the capital city, the network coverage was not complete. Only 30% of the city was covered.

Table 1 – Market landscape

Capital City State

Households 2,200,000 8,800,000 Computer Households 1,100,000 3,100,000 Internet Households 1,050,000 3,000,000 B2C Tags 264,000 350,000 Homes Covered 660,000 875,000

The competitive position of Airtel wasn’t all that great either. Airtel was only the third largest. BSNL was the market leader. The fly in the ointment was that it was a local player who was second with 30% share. The competition scenario is as follows:

Table 2 – Competitive situation

BSNL Airtel Reliance Tata Local Op - 1 Local Op - 2 Market

CMS 40%

10%

3% 5% 30%

12%

100%

City Coverage 80%

30%

50%

50%

50%

40%

90%

Tags 704,000 264,000 440,000 440,000 440,000 352,000 2,640,000

No of Subscription 300,000 75,000 22,500 37,500 225,000 90,000 750,000

ARPU (Rs.) 850 1000 700 750 800 600 810

Tag Utilization 42.6% 28.4% 5.1% 8.5% 51.1% 25.6% 28.4%

Last year, they had launched a scheme to stimulate sales where CPE (Customer Premise Equipment) was given free for all new customers. This had taken up the sale by 20% in terms of gross adds and the circle saw positive net adds for a few months. After 3 months, churn also shot up to higher levels. The Customer Service team was not able to pinpoint why churn was on the rise.

Table 3 – KPI trends

Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14

Gross Adds 2,000 2,050 2,000 2,500 2,500 2,400 2,500 2,450 2,400 2,500 2,100 2,500

Net Gross 1,700 1,725 1,700 2,200 2,150 2,050 1,975 1,925 1,850 1,850 1,600 1,750

Conversions 150 160 150 155 165 165 185 190 195 200 210 250

Sales Reversals 150 165 150 145 185 185 340 335 355 450 290 500

Churn 1,500 1,550 1,530 1,550 1,625 1,700 1,800 1,850 1,875 1,900 1,775 1,875

Net Adds 200 175 170 650 525 350 175 75 -25 -50 -175 -125

Tag Utilization 29.2% 29.1% 29.1% 29.0% 28.7% 28.5% 28.4% 28.3% 28.3% 28.3% 28.3% 28.4%

Base Movement

77,070

76,870

76,695

76,525

75,875

75,350

75,000

74,825

74,750

74,775

74,825

75,000

Churn was high citing competitive pricing reasons. But prices had not changed for a long time citing competitive pressures. The circle always managed to get an exemption on price hikes citing competitive scenario. Hence the benefit of price increase that other circles were enjoying in their revenue growth was not seen in this circle leading to missing annual targets for the last two years. This year also, the team was planning to request to be exempted from the price increase that will happen nationally because of rising inputs costs. The reason they felt was that the base was steadily declining. Hence it looked like they will miss

the annual targets again this year because the price increase benefit will be missed out. There was no advertisement in newspapers and radio in the last 3 years because Head office had always told them the city was not covered fully. Invariably, the marketing budget was only utilized 40% in the last two years. However, circle was exceeding the Wireline Broadband (DSL) Gross Acquisition Cost (GAC) budget consistently. The Finance Head was quite clear that this is not acceptable and has been after the Marketing team to reduce the GAC. The CEO agreed with him.

Table 5 – Commission Structure Plan Rental (Rs.) < 899 899 to 1199 1299-1699 > 1699 Activation Fee 50

0 500

500

500 Wi-Fi modem Free Free Free Free

Commission Structure Base Commission 1,000 1,250 1,600 2,250 Target Achievement Bonus 25

0 250

250

250 Hi Value Plan Incentive 0 10

0 200

300

Table 6 – Competitive Pricing Comparison

Rate per GB (Rs.) BSNL Airtel Local Op – 1 Local Op - 2 < 899 70 90 75 60 899 to 1199 60 85 65 50 1299-1699 50 75 55 40 > 1699 45 65 40 35 Modem On Rental Free Rs.2000 Rs.1500 Activation Fee Rs.500 NA Rs.500 Rs.500

Security Deposit Rs.500 Rs.500 NA NA

Table 7 – Investments and Network performance indicators

Q4-12 Q1-13 Q2-13 Q3-13 Q4-13 Q1-14 Q2-14 Q3-14 Q4-14

Fault Rates (%) 6.2% 6.5% 7.5% 7.1% 7.3% 8.2% 9.2% 8.6% 8.8%

Tag Repair Cost (Rs Mn) 21.0 19.5 13.0 16.0 14.0 12.0 5.0 9.0 8.4

Capex (Rs Mn)

45.0

27.0

12.0

18.0

12.0

9.0

2.0

6.0

3.0 New Tags

The CEO acknowledged that the situation was challenging however the situation was not something where we need to live with the current reality. He wants to re-launch the business. He wants you to make a presentation to the circle leadership team on

1. Your analysis of the problem 2. How we can start making gains in the circle and

Among other things that you feel are relevant, the plan must cover the following

a. How to reduce GAC? b. How to take up prices / realization? c. How to reduce churn? d. How to take up gross and net adds? e. How to take up Lead generation?

Abbreviations/Terms Definitions: DSL: Direct Subscriber line CPE: Customer Premise Equipment CMS: Customer Market Share ARPU: Average revenue per user Tag: A network element on the road needed to provide Wireline Broadband (DSL) connection to a

household Tags Utilization: No of tags with active customers /No of tags rolled out Gross Add: No of new customers acquired Churn: No of customer disconnecting or moving out Net Add: Gross adds minus Churn Sales Reversals: Sales reversed due to bad connection sale GAC: Gross Acquisition Cost (Commission + Activation) Lead Generation: Leads in and out through Customer care call centers Conversions: incidences of disconnection of an old connection and converting to new one High Value Plan: Plans >=1299/- rental Fault Rate: Connection not working / Total Number of connections.