Tata DoCoMo’s Pricing Strategy

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Aakanksha Chabba (Roll no 01)

Aarti Gonsalves (Roll no 02)
Aditi Awasthi (Roll no 05)
Amit Ahuja (Roll no 09)
Anant Kumar Chauhan (Roll no 12)
Ankush Bahri (Roll no 15)
Denny Thomas (Roll no 35)

Tata DoCoMo pricing strategy – an analysis Page 1

 Disruptive Innovation in the Indian Telecom Industry by Tata
DoCoMo

Wikipedia defines disruptive innovation as an innovation that improves a product or

service in ways that the market does not expect, typically by being lower priced or
designed for a different set of consumers.

Indian Telecom space was “disrupted” by Tata DoCoMo when they came out with a ‘1
paisa per second’ tariff.

We’ve earlier seen how Reliance India Mobile changed the mobile industry by coming
up with the lowest tariff in the beginning of this decade. The call charges were around
Rs 2-3 per minute and because of Reliance this was brought down to around Re 1 per
minute.
Tata DoCoMo was the next one to employ disruptive innovation in the Indian mobile
industry. Currently the game is not played on the price front but Value added services
front, which is evident from the advertisements of Airtel (Madhavan and Vidya Balan)
and Vodafone (Zoozoos) in the past.

If Aircel is redefining how telecom operators approach value added services and GPRS
in India, Tata DoCoMo is doing its bit to change billing practices.

The joint venture between Tata Teleservices and Japanese telecom major NTT DoCoMo
officially began rollouts with a plan to invest $2 billion for its pan-India GSM services.

“Pricing Differentiation…it’s been tried before!”

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Tata DoCoMo appears to be banking heavily on its tariff plans – the company offers a 1
second pulse instead of the usual 1 minute pulse that other telecom operators were
offering. This means that consumers are charged on a per second basis, instead of a per
minute basis, and end up saving money on unused seconds. A nifty little application
“How much can you really save” on DoCoMo’s website explains how this works. Rs.
0.01/second is a marked change from the Re 1/min and Rs. 0.49/min charges that
usually apply.

Now while this plan might sound unique, it isn’t that it hasn’t been tried before: back in
2004, Tata Indicom had launched 1 second pulse plans, which going by their current
plans, appears to have been shelved.

At present, Tata DoCoMo has launched voice portals, 24-hour music, cricket
commentary and voice chat, apart from offering free Missed Call Alerts and VoiceMail.

Interestingly, voice based services are also being priced with a per-second-pulse: 24
hour music and voice chat are priced at Rs. 0.02/second. Caller Tune search service
‘Genie’ is also being priced at Rs. 0.02/second. This is a marked change, again, from the
per minute pricing, and can offer consumers cheaper options.

An initiative that has taken the service provider industry by storm

The pay per second model has really paid off well for the latest entrant in the Indian
GSM space, Tata-DoCoMo. The new pricing strategy from Tata-DoCoMo has changed the
rules of the GSM game, which is dominated by AirTel and Vodafone. Tata-DoCoMo also
launched its first mobile handset in September 2010.

Mobile pricing innovation – Tata DoCoMo now charges per website for
Mobile Browsing!

This is surely a first world over – Tata DoCoMo have gone ahead and launched an
innovative mobile Internet offering which allows users unlimited usage of their
favourite websites on mobile for a fixed cost.

Tata DoCoMo has been forefront in coming up with various attractive pricing schemes,
especially, in the pay-per-use paradigm. They were first to introduce pay per second
billing on calls, which now is followed by every mobile service provider. They followed
it with pay-per-minute and pay-per-call pricing plans as well which has made them one
of the fastest growing Mobile companies in India.

The new pay-per-website offering however, takes it to a complete different level and
unheard of pricing strategy. This is a very thoughtful strategy and something which has
potential to growth rapidly.

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Pay Per Site offers two combination packs –

 Those only interested in single websites need to pay Rs 10 per site

 Those with multiple site browsing needs can opt for a combo pack at just Rs 25
per month.

Customers have a bundle of options within various categories of social networking sites
(Facebook, Twitter, Linked-In, Orkut), mail options (Gmail, Yahoo, Rediff) and chat
messengers (GTalk, Yahoo! Messenger, Nimbuzz).

Having said this, there is also a caveat – If you thought it was valid for unlimited use…it
is not.

Tata DoCoMo pay per site plan categorizes each service under 2 different genres –
Social Networking Site and Emailing & Instant Messaging. Each site under this genre is
priced at Rs. 10/- bundled with 200 MB free data usage valid for 30 days, post which
customers will be charged at 1p/kb. There are also 2 Combo options – SNS Combo Pack
and Emailing Combo Pack and each Combo Pack is priced at Rs. 25/- bundled with 500
MB free data usage post which the customers will be charged 1p/kb.

We have been quite impressed the way Tata DoCoMo have gone about their innovative
pricing models as well as marketing strategies.

“Per Character” SMS Pricing

On 8th September 2009, the GSM branch of the Indian carrier Tata introduced a novel
pricing strategy for text messaging. Under the brand “Diet-SMS“, Tata-DOCOMO bills its
customers “by-the-character”, rather than on a per message basis.

It is a very attractive marketing scheme, since many wireless subscribers, almost by

habit, tend to pepper their text messages with abbreviations and acronyms.

Under the new plan, Tata-DoCoMo charges “one paisa per character”. For example, a
text which reads “tnx” (for “thank-you”) is charged at 3paise instead of the normal sms
charge.

The Impact

 Tata DoCoMo has gathered significant market share, owing to its pricing
strategies.
 Existing mobile operators are matching the price and the clear winners are the
subscribers since all the competition is sending the prices downhill.

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 Our Take

 With the proliferation of telecom operators in various metro circles continuing,

the likely outcome will be a further decrease in rates, but we think these are
likely to impact low ARPU users, and perhaps increase churn.
 The key issue among high ARPU users will be network coverage; they would
prefer that a call go through, or not be disconnected, than save Rs. 0.5-Re.1 on a
call.
 At the same time, since operators have so far been focused on the “land-grab” of
subscribers, the growth in the subscriber base is likely to be more distributed.
We wonder if we’ll eventually see a trend of people in metros keeping multiple
handsets for different services. In which case, a dual-sim handset would help.

Tata DoCoMo has set a precedent in the telecom industry through its innovative
strategies. It is trying to keep ahead in terms of innovation and the coming few years,
with the onset of 3G services, promise to be very exciting for the mobile phone
subscribers.

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