Telecom fiasco: Ad industry cautious; not panicky

The telecom industry has been going through an upheaval in the recent past. The latest one is the cancellation of 2G licenses for many players. afaqs! speaks to both the parties concerned - brand owners and agencies - to find out their take on the situation.

The Indian telecom industry has been hit by another fireball - this time it's the cancellation of 122 2G licenses. So much so, the existence of certain companies and brands is under question. As of now, there is no clarity on what lies in store in the future - both near and far.

It's immediate

The advertising industry is certainly concerned about the whole fiasco, though the feeling that afaqs! could gauge was that the industry is equally scared and cautious, but not panicky as of now. The fear of losing business may come in later, but the immediate worry for many agencies is to recover old dues in case these companies shut shop.

An agency head handling a prominent telecom account says on grounds of anonymity, "Yes, it is a grave cause for concern for agencies handling these brands. Though one knows at an intellectual level that the government will do something about this since the country's credibility is at stake, a certain level of risk cannot be denied."

So, what can be done to combat this situation? "We just have to be patient and restore confidence in the consumers, on behalf of our clients who're in trouble. That's our role as agencies," he adds.

While agencies at large have reason to worry, the situation may not be all that bad because very few of these players are present only in the telecom sector and often, the same agency is in-charge of the creative duties for all the businesses for a particular client. Thus, the affected telecom brands will try their best to retain their respective relationships with their agencies, for the sake of their businesses in other sectors beyond telecom.

As Nikhil Rangnekar, chief executive officer, media and analytics, Spatial Access, puts it, "It will be a greater cause for concern for those agencies that are handling just the telecom part of a particular client's business or if the client does not operate in segments beyond telecom."

Indian telecom players spend about Rs 1,200 crore on print and television every year. Telecom is also one of the large spenders on OOH (out of home) and the spend on this medium also accounts for another Rs 600 crore.

A senior media planner from a leading media agency feels that media owners will be adversely affected, particularly OOH players.

"Outdoor media owners in small towns and semi-urban areas - places where the affected operators advertised heavily - are the ones who will be hit badly due to the exit of smaller players," he says.

In the near future

So how will the telecom industry shape up? Will it continue to be one of the top three advertising categories or will it squeeze its media spends drastically?

A senior agency head says, "Many international players affected with the cancellation of licenses may even consider exiting the country. It's very unlikely that these companies will continue to advertise so aggressively."

However, market experts also like to believe that the affected brands will need to advertise even more to retain the consumers' confidence. However, this may not hold true. According to a marketing head of a large telecom company, which has lost a couple of its licenses, aggressive advertising at this stage may harm the brand equity. "The point is to convince customers that it's business as usual. Going out of the way to convey, 'We're ok' may just backfire," he says.

Instead, he is of the opinion that companies should show aggression at the product level, with more discounts and offers to retain customers.

In the given scenario, if a few players exit the market, it would mean that many customers will be up for grabs. The entire fiasco may also force many consumers to abandon their existing service provider. In such a scenario, the players which are completely unaffected, such as Airtel and Vodafone, will go for aggressive acquisition, implying aggressive advertising.

Mahesh Uppal, an independent telecom analyst, likes to differ. "The bigger players anyway have nation-wide licenses. Those affected by license cancellations are largely low income and low margin customers, who typically have multiple SIMs, not all of which belong to companies that are losing their licenses. So, there is little incentive for the existing companies to pursue these customers aggressively, especially since, unlike before, having more customers will not entitle one to an increased spectrum," he says.

Telecom analyst Kunal Bajaj, director, Analysys Mason concludes that going forward, the existing players need to focus on value generation for their customers and on remaining the primary SIM.