Why it Makes Sense for Telecos to Partner with Social Media

Telecom companies

A mathematical game theory propounds that there are two kinds of games: a zero-sum game and a non-zero-sum game. A zero-sum-game is one in which the loss of one player results in the victory of the other. In a non-zero-sum game, every player’s best strategy needs to consider the strategy of every other player. The recent marriage of telecom companies and social media giants is a classic non-zero-sum-game.

It may appear like a revelation, but the association of telecom and social networking companies is an established practice now. One can easily debate the superiority of innovation in the nature of their association. Not surprisingly, Vodafone was the first telecom company to bank on the staggering number of social media users in India, especially Facebook.

The telecom giant launched a phone in August 2011, customized for those who are glued to Facebook, arguably to attract the young users. The device offers a one click access to Facebook, which would translate to simply having to turn on the device to log into your Facebook account. The users loved it too, but it wasn’t only because it was a Facebook phone. There were more, and better reasons.

Not only was the device made affordable, the data plans were also flexible. Later in the year Facebook announced partnerships with device manufacturers HTC and INQ. In the same year, India’s largest telecom operator partnered with Facebook to allow its users to access their Facebook account without the need of data connectivity on their phones.

All of this was provided to subscribers at Re 1 per day. Exactly a year back, in 2010, Airtel was the first operator to allow its users to use Facebook’s mobile site for two months for free.

The next interesting partnership in line was between Google and Reliance Communications in August 2012. It was an attempt by the telecom major to leverage the search giant’s massive user base and their growing obsession with the Android operating system. Reliance promised exclusive data plans for Android users for a period of two years, and went so far as to introduce exclusive apps, customer care service, and dedicated Android experience zones.

One could recall without much difficulty the massive print and outdoor advertising campaigns of this partnership that followed in late 2012. In the subsequent months, Reliance was the first telecom operator to slash its data prices by upto 60%. This coincided with Google’s extra efforts to deflect new social media users to Google Plus.

It was a win-win situation for both. This established the trend in 2012; the acceptance of India’s social media growth story and the willingness towards innovation have been the only questions left unanswered.

Recently, Vodafone India went a step ahead to associate with the micro blogging site Twitter. The two recently came together to offer free Twitter access to its prepaid and postpaid users in India. In what appeared to be a litmus test of the association, the service was available from July to November 2013.

Vodafone’s android users could access official Twitter applications as well as Twitter’s mobile site for free. All in all, more than 8 deals have come through since 2011 which involve the leading names of social media and telecom companies.

While the growth and dynamism of Facebook is not surprising for the deals it has made with telecom companies, Twitter too has been highly active in this race. Twitter has already tied up with Reliance Communications allowing the Reliance GSM prepaid users to get free Twitter access.

Who benefits from the deal?

The profit-sharing model of these partnerships is not very clearly available in the public domain. But it is clear that the telecom operators are clearly preparing their soil for long term returns. Currently, voice-based services account for a major portion of the revenues of telecos but this is certain to shift slowly to data based services with the advent and growth of smartphones in India.

For most telecom companies, voice-based services account for 85-92% of the total revenues whereas data-related services contribute to 8-15%. A rapid shift in relying on data services for profits is not a wise idea for telecom companies. Therefore they are taking baby steps towards launching short term partnerships, slashing 3G prices, offering additional features and discounts to users to leverage this platform slowly. The shift will be gradual, but inevitable.

On the other hand, the partnerships have been interesting experiments for social networking sites to increase their user base through mobile and smartphone devices. A recent ComScore report reveals that nearly 65% of Facebook users access the network on their mobile phones.

According to the telecom regulator TRAI, 7 out of 8 internet users across India access the internet on mobile devices. This, coupled with a market flooded with cheap smartphones, has given telecom operators the thumbs up. Tier one and two cities of India have seen staggering growth in the number of users in the last few years. According to the ComScore report, the top 15 Indian cities account for around 45% of Facebook usage.

Simultaneously, tier two cities have reported significant increase in their social media user base with a large number of them accessing networks through their mobile devices. Therefore, as social networks are increasing their mobile user base through these partnerships, brands will have to start looking at mobile-first social strategies.