Delivering to expectations of the 600 million ‘digital customers’ in 2020 will require operators to develop new capabilities and ecosystem partnerships. The government needs to provide adequate spectrum at market relevant prices, which will bring back capital investments in the sector.

1. 1Serving India’s Digital Consumer
Serving India’s Digital
Consumer
India stands on the threshold of a digital boom
that promises widespread benefits. Realizing this
opportunity will require government and industry
to take immediate action.

2. 2
Foreword
In less than a decade, India will boast the world’s second-biggest population of smartphone-
connected mobile Internet users—more than half a billion of them. This boom has the potential
to transform the nation’s economy, society, and governance.
All players in India’s telecom industry—from operators and handset manufacturers to equipment
and infrastructure providers and policy makers and regulators—need to prepare themselves to
facilitate this transformation. Only by looking beyond the uncertainty of the last few years and
acting now to build a strong foundation that satisfies the data demand and ensures availability
of the right services—at the right price—will they meet consumers’ aspirations.
The digital consumer of 2020 will have high expectations, and companies that want to deliver
a superior customer experience and fulfill those expectations will have to broaden product
portfolios, digitize core operations, and invest in leading-edge technologies to meet band-
width demands.
Meanwhile, the government must resolve the current impasse and define clear, forward-looking
policies. In particular, it needs to be cognizant of spectrum economics for data use, offer
additional spectrum that’s more in line with global standards, and provide a definitive road map
for implementing the National Telecom Policy (NTP 2012). These are among several important
steps required of the industry today if it is to serve India’s digital consumers tomorrow.
In this context, the paper “Serving India’s Digital Consumer,” jointly produced by the
Confederation of Indian Industry (CII) and A.T. Kearney, highlights key imperatives for industry
and government in preparing to serve the digital consumer of tomorrow.
Kiran Karnik, Chairman,
National Committee on Telecom
and Broadband
Confederation of Indian Industry
Mohit Rana, Partner,
Communications, Media
& Technology Practice,
A.T. Kearney
Serving India’s Digital Consumer

3. 3Serving India’s Digital Consumer
Mobile Boom’s Widespread Impact
Sizable population accessing Internet on mobile in 2020
It is estimated that more than 600 million people will be using mobile Internet and that
broadband will connect 150 million computing devices by 2020 (see figure 1). This growth will
be spurred by a sharp rise in smartphone adoption, expected to reach 50 percent penetration
by 2020, and is likely to have a seminal impact on Indian society, corporations, and governance
in a multitude of ways (see figure 2).
Mobile Internet users
(millions)1
600
400
200
800
0
130 30 <10%
150
40%-50%
600
2013 2020
Connected computing
devices (millions)2
150
100
50
200
0
2013 2020
Smartphone penetration
(%)
40
30
20
10
50
0
2013 2020
1
Includes all technologies
2
Includes personal computers and tablets, 87 percent connected via broadband
Sources: International Telecommunication Union, Business Market Intelligence, International Data Corporation; A.T. Kearney analysis
Figure 1
Mobile Internet and smartphone penetration in India
4x-5x 5x
5x
Sources: Cisco Visual Networking Index, Reserve Bank of India, eMarketer, YouTube, China Internet Network Information Center; A.T. Kearney analysis
Figure 2
Potential m-services adoption in India by 2020
140million
900million
300million
75million
11million
80million
Unbanked with
access to mobile
financial services
Children with online
access to education
Monthly app
downloads
Hours daily video
streaming on mobile
Annual m-commerce
purchases
Users of instant
messaging
services
Expected data traffic
(exabytes)
20.0
2020
10x
1.8
2012

4. 4Serving India’s Digital Consumer
Society. Evolution of strong local and global communities, increased awareness, new approach
to learning, banking, and buying; changes in media and entertainment-consumption habits
Corporate. Emergence of new businesses; need for new operating models to engage the
consumer; emergence of crowdsourcing and digital media; greater consumer activism
Governance. E-governance across most government-to-citizen interface points, identity and
privacy management, subsidy payment, health care, greater public empowerment
Understanding the behavior and expectations of the digital consumer
Many mobile-data users will embrace the online medium as part of their lifestyle and will use it
for acquiring information, for entertainment, for socializing with friends and family, for augmenting
health care, and for countless other purposes. In short, they’ll become digital consumers, and
while their behavior may evolve in nonlinear and unpredictable ways, it is likely to exhibit the
following traits:
• Community orientation. Share heavily, and rely on peer recommendations.
• Instant gratification. Try new services anytime, anywhere.
• Extreme personalization. Base content access on personal interest, current location, and time.
These consumers will have much higher expectations than today’s consumers, and fast, easy
access to information will make them highly demanding and proactive in fulfilling their needs
(see figure 3). Moreover, the shift in consumer expectations will occur against a backdrop
• Wide m-service portfolio (under-
standing customer needs is a
differentiator)
• Affordable data plans
• Personalized tariffs
Product
portfolio
• VAS and m-services not a priority;
driven by pricing of voice, SMS
• Marginal differentiation
in offering
• Uninterrupted voice quality and
coverage
• Consistent high-speed mobile
Internet
Expectations
in 2020
• Instant activation; sales online
and on apps
• Digital and interactive
communication channels
• Differentiated service
• Evolved and self-sustained digital
help
• Quality technical help for basic
data users
Notes: VAS is value-added services. SMS is short message service.
Source: A.T. Kearney analysis
Figure 3
Changes in customer expectations
Expectations
in 2013
Connectivity • Moderate voice and data
coverage and quality
Sales and
marketing
• Technology and
spectrum investment
Key imperatives
for industry
• Digitization of core
operations
• Enable digital
service ecosystem
Customer
service
• Moderate service levels and
quality of interaction
• Human interface (call centers,
stores), digital secondary and
basic
• Complexity and poor service
levels in activation
• Largely physical channels
• Direct marketing, but
non-interactive
• Spectrum availability
and management
Key imperatives
for policy makers
• Clarity on policies and
push for implementation

5. 5Serving India’s Digital Consumer
of significant slowdown in new subscriber additions. As a result, operators will have to make
a shift of their own, from focusing on driving sales to serving the rapidly changing needs of their
existing customers.
Consider this: About 80 percent of today’s customers are serviced through traditional channels,
such as stores and call centers offering moderate service levels. These will need to be diver-
sified into multiple channels, with digital channels assuming significance for both sales and
service. A large proportion of tomorrow’s users will be comfortable with self-service through
peer recommendations or online channels, as is the case for electronics and web portals today.
Operators will need to make such channels readily available.
Three Imperatives for the Telecom Industry
Operators expecting to meet the digital consumer’s evolving expectations will need to address
three crucial areas:
1. Technology and spectrum investments. The exponential growth in data traffic in India will
require significantly higher spectrum than is available now. Based on observation of other
markets, we estimate that each operator will need 30 to 50 megahertz (MHz) of spectrum to
meet data traffic needs (see figure 4). Data traffic will occupy more than 90 percent of the
spectrum to meet future demand at the optimum price level. As we have seen in other markets,
the revenue contribution from data is still expected to be less than 30 percent, with margin
Sources: Various regulator websites; A.T. Kearney analysis
Figure 4
Spectrum allocation across emerging and developed markets
Spectrum allotted per operator
(MHz)
2,600 2,100 1,800 900 850High bands: Low bands:
Telstra–
Metro
15
8
20
15
58
Vodafone–
Metro
Australia United Kingdom Malaysia Indonesia India
10
8
30
20
68
Telefonica
18
6
10
34
Everything
Everywhere
45
20
65
Digi
25
20
10
57
MAXIS
10
16
25
20
71
Celcom
10
17
25
20
72
Telkomsel
22.5
7.5
15
45
Indosat
10
10
15
10
45
Top 3
operator–
Metro
8
15
2
5
2

6. 6Serving India’s Digital Consumer
contribution as low as 20 percent. Clearly, tomorrow’s spectrum economics—including
pricing—will be very different from the economics of today’s 6 to 10 MHz spectrum, primarily
used for voice.
In addition to spectrum, operators will need to invest significantly in radio networks, backhaul,
and next-generation network (NGN) migration. Over the past three years, regulatory uncertainty
and high debt burdens have combined to slow operators’ capex spending to under 15 percent
of sales. Ideally, operators will need to invest 20 to 25 percent capex over the next few years to
prepare for data traffic needs, but the economics have to improve first. At a 30 percent EBITDA
margin and substantive interest costs, high regulatory payouts can crowd out capex and slow
down network rollout, a scenario we have seen in other markets and, indeed, in India in the past.
It is important to note that inadequate spectrum availability and capex investments will lead
to supply-side constraints in meeting market needs—which in turn will lead to higher tariffs for
India’s consumers. For the rural consumer, the planned National Optical Fiber Network (NOFN)
is a step in the right direction, but its success is contingent on the rapid implementation of
viable business models through public and private partnerships to provide last-mile access to
the consumer from the NOFN landing point. This will ensure the infrastructure is adequately
leveraged to serve the rural consumer while providing the government with a return on its
investment.
Digital consumers will have much
higher expectations than today’s
consumers, and fast, easy access to
information will make them highly
proactive in fulfilling their needs.
2. Digitization of core operations. Telecom operators need to drive digitization using a three-
pronged approach as demonstrated by other global and Indian players: embracing digital
media, digitization of physical touch points, and making internal processes customer-centric
(see figure 5 on page 7). We advise India’s operators to meet customer expectations at each
point in the relationship, from building awareness and activation to usage, payment, and
termination. Further, operators will need to have two equally important and parallel processes
to serve both the digitally evolved and the basic consumer. This requires a customer-centric
view to design effective core processes, organization, skills, and systems. While leadership
support for these initiatives is important, employees who understand the digital consumer’s
needs are perhaps even more important.
Following are our suggestions for making the three most important telecom business functions
more conducive to attracting the digital consumer:
Sales. Evolved consumers will expect more engagement through digital channels such as email,
apps, mobile websites, and social networks. At the same time, basic and new customers will
prefer traditional channels and seek more information about complex new services. Operators

7. 7Serving India’s Digital Consumer
need to invest in transforming current physical touch points and promoting services using
touch screens and smart devices to stimulate instant trial and purchase. In addition, they should
work with other stakeholders and upgrade their IT systems to enable online identification and
completion of forms to reduce service-activation time.
Marketing and analytics. Operators need to actively adopt digital media and digitize traditional
marketing channels by using interactive outdoor displays, smart devices at stores, quick-response
(QR) codes, and other emerging technology. They can also leverage consumer information that
will become available as consumers spend an increasing amount of time on networks and using
digital services. This will need investment to develop deeper, more advanced analytics capabil-
ities to identify customer trends. This information can be used to segment customers, design
more targeted products, and drive advertising and database revenues.
Customer service. Customer service will have to undergo a major transformation to improve
the customer experience. The first task is to create segmented service channels for the following
categories:
• Advanced users. Access to digital touch points to discover new services and resolve
complaints
• High-value customers. Superior service at digital and physical touch points
• Basic users. Education and assistance in using digital services at virtual or physical touch
points
Online touch points will need to be expanded and should include self-sustaining digital
platforms using crowdsourcing, instant messaging, and social media. Additionally, operators
can provide greater transparency by allowing customers to track the progress of a complaint
or service request.
Note: QR code is quick-response code.
Sources: Internet Retailer, news articles, company websites; A.T. Kearney analysis
Figure 5
Digitization of core operations: case studies from across industries
Embracing digital
media
Sales Free Mobile (France) attracted
more than two million users in
two months using zero budget,
web-only distribution
Tesco runs a virtual store in
Korea—shop by scanning QR
code on a digital billboard;
goods delivered to home
SingTel ensures instant
activation and delivery of
digital services
Digitizing physical
touch points
Making internal
processes customer
centric
Marketing and
analytics
Amazon yielded 35 percent
revenue from cross-selling,
thanks to a recommendation
engine that suggests new items
Samsung promoted Wave
phone through an outdoor
campaign using interactive
screens
Google uses advanced
analytics to send targeted ads
based on user browsing
behavior
Customer
service
Best Buy responds within
15 minutes to customer
queries on Twitter and
Facebook
Singapore airport uses touch
screens to record customer
feedback at points of service
in the airport
Flipkart ensures transparency
by allowing users to track
consignments online

8. 8Serving India’s Digital Consumer
3. Enabling a digital service ecosystem. Tomorrow’s leading mobile digital services will require
an integrated ecosystem across various industries. Though operators have tried various models
globally, very few have been able to create a successful, replicable business model.
We recommend India’s telecom operators become smart enablers, collaborating with other
players in the following ways:
• Design enabling platforms:
— Develop platforms that allow participation in the ecosystem.
— Create open interfaces allowing others to leverage operator assets and customer
information.
• Facilitate ecosystem integration:
— Collaborate with partners to create industry standards.
— Foster alliances that generate customer awareness and take advantage of brand affiliations
and marketing clout.
• Leverage customer data through analytics:
— Provide real-life insights into digital-consumer behavior.
— Offer customers tailored solutions and instant recommendations.
Government needs to allocate consid-
erably more spectrum for telecom
services, taking into account the impact
of data traffic on spectrum economics
and pricing.
This strategy requires operators to be proactive in several areas. First, drive consensus on
standards and operating models, especially for new and complex services and to ensure
interoperability. For example, mobile banking requires a common platform, software, and
revenue-sharing modalities with the banking industry.
Second, partner with content and service providers to offer customers more choice. Investing
in advanced analytics tools to capture consumer behavior is crucial for designing and
promoting new services.
Third, experiment continually with new services, monitor adoption, and promote popular
services while scaling back others. Always keep in mind that because consumer behavior is
ever evolving and hard to predict, digital services require a lot of trial and error to achieve
success.
Remember, too, the importance of undertaking initiatives such as developing local-content,
low-cost smartphones, and other devices to provide digital services. Mobile health services,
for example, can only flourish if low-cost health-monitoring devices are available for rural
customers and adopted by health practitioners.

9. 9Serving India’s Digital Consumer
Key Policy Actions
Serving India’s 600 million future digital consumers will require major investment in infra-
structure by an industry already under immense financial stress. The time is ripe for the Indian
government to resolve impending issues, lay the foundation for digitization through spectrum
management and NTP 2012 implementation, facilitate infrastructure expansion through rural
infrastructure rollout and conducive infrastructure policies, and enable development of an
ecosystem for digital services through clear licensing norms.
Spectrum policy and management. India’s telecom companies are managing the industry’s
exploding growth on inadequate spectrum. Moreover, high payout expectations from spectrum
allocation over the next couple of years will lead to severe financial challenges for these compan-
ies and could result in price increases that make data services unaffordable for the majority.
The government needs to allocate considerably more spectrum for telecom services, taking into
account the impact of data traffic on spectrum economics and pricing. Prioritizing the auctioning
of 700 MHz spectrum, which is highly cost-effective, will be a step in the right direction.
Smart enablers experiment with
new services while scaling back others.
Always keep in mind that digital services
are a trial and error business.
NTP 2012 implementation. NTP 2012 offers guidelines on spectrum allocation and efficient use
through re-farming, sharing, and trading. The government needs to clarify modalities and time
lines for the implementation of this policy. In addition, policy makers should benchmark global
best practices in optimizing spectrum use. The Indian government’s proposed re-farming of
spectrum is in contrast to markets elsewhere, which allow continued use on payment of renewal
fees and re-farming and sharing at the operator end or compensate operators with part of their
spectrum in other suitable bands.
Rural infrastructure rollout. The proposed NOFN rollout has been set into motion with Bharat
Broadband Network Ltd. (BBNL) laying the required fiber. In addition to increasing delivery
speed to ensure a timely rollout, government needs to engage private players at an early stage
to prepare viable business models to drive scalable community services while ensuring return
on investment in rural markets.
Smart enablers experiment with new services while scaling back others. Always keep in mind
that digital services are a trial and error business.
Promoting infrastructure expansion. Government must take action on benefits that accrue to
telecom tower providers post-inclusion in the infrastructure sector, including accelerated
depreciation, higher external commercial borrowing limits, and lower lending rates, among
others. A uniform national policy is needed for right-of-way permission that can be imple-
mented by state governments, thus enabling faster infrastructure rollout.

10. 10Serving India’s Digital Consumer
Meeting green telecom requirements. The adoption of green technology to power telecom
infrastructure has been below mandated levels due to issues surrounding implementation and
financial feasibility. Revolutionizing green telecom will require strong governmental support—
both fiscal and non-fiscal—especially from the Ministry of New and Renewable Energy, as part
of its carbon footprint-reduction initiatives.
Unified licenses. After a series of delays, Indian operators anticipate prompt implementation of
a unified license policy. We believe the government should provide appropriate incentives to
encourage all operators to shift to a unified license. We also advocate a clear policy on exit
norms and interconnection charges to avoid adverse situations in the future.
Digital services. Clear, transparent regulation—or a lack of regulation—is required to provide
m-services through the unified license, as these services will transgress the domains of several
other government departments, such as the Ministry of Finance, for m-banking services.
Joining Forces
India is on the cusp of a quantum leap in mobile-data and digital services. The digital consumer
is ready to embrace the connected future, one that can lead to significant benefits for the
country. Industry leaders and policy makers need to be ready, too—to work together and pave
the way for India’s digitization.

11. 11Serving India’s Digital Consumer
About A.T. Kearney
A.T. Kearney is a global team of forward-thinking partners that delivers immediate impact and growing
advantage for its clients. We are passionate problem solvers who excel in collaborating across borders to
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With more than 500 consultants focused on the sector, A.T. Kearney has an industry-leading communications,
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About CII
The Confederation of Indian Industry (CII) works to create and sustain an environment conducive to the develop-
ment of India, partnering industry, government, and civil society through advisory and consultative processes.
CII is a non-government, not-for-profit, industry-led and industry-managed organization, playing a proactive role
in India's development process. Founded more than 118 years ago, India’s premier business association has more
than 7,100 member organizations from the private and public sectors, including subject matter experts and multi-
nationals, and an indirect membership of more than 90,000 companies from around 257 national and regional
sectoral associations.
CII charts change by working closely with government on policy issues, interfacing with thought leaders, and
enhancing efficiency, competitiveness, and business opportunities for industry through a range of specialized
services and global linkages. It also provides a platform for consensus building and networking on diverse issues.
Extending its agenda beyond business, CII helps industry identify and execute corporate citizenship programs.
Partnerships with more than 120 non-governmental organizations across the country carry forward our initiatives
for integrated and inclusive development in affirmative action, healthcare, education, livelihood, diversity
management, skill development, empowerment of women, and water, to name a few.
The CII theme for 2013-14 is Accelerating Economic Growth through Innovation, Transformation, Inclusion, and
Governance. To this end, CII advocacy will accord top priority to stepping up the growth trajectory of the nation,
while retaining a strong focus on accountability, transparency, and measurement in both the corporate and
social ecosystem, building a knowledge economy, and broad-basing development, to help deliver the fruits
of progress to many.
With 63 offices including 10 Centres of Excellence in India and seven overseas offices in Australia, China, France,
Singapore, South Africa, the United Kingdom, and the United States, and institutional partnerships with 224
counterpart organizations in 90 countries, CII serves as a reference point for Indian industry and the international
business community.