Why falling mobile subscriber base is good for Indian telcos

Amid talk of India's subscriber base hitting a stonewall and stagnating, following the drop in the number of wireless subscribers in India for the first time in July this year, the Cellphone Operators Association of India's (COAI) latest statistics only seemed to confirm that the telecom revolution has hit aplateau.

But, Rajan Matthew, director general of the Cellular Operators Association of India told Firstpost that the figures were actually a good sign that sanity is returning to the market amid competitive pressures.

According to figures released by the Telecom Regulatory Authority of India (TRAI), the number of wireless subscribers in July 2012 fell to 913.49 million from 934.09 million in June, a fall of 20.61 million or 2.21 percent. This steep fall in the number of wireless subscribers was majorly due to Reliance Communications- a CDMA operator-shaving off a whopping 20.49 million subscribers (or 13 percent of its user base) who were inactive.

Reuters

The GSM operators seem to have followed suit in this new approach of concentrating on increasing the Average Revenue Per User (ARPU) and not just notching up subscriber numbers.

Data released by COAI for August 2012 shows a dip of 7.1 million subscribers in India's GSM subscriber base. According to its data, the total number of GSM subscriptions as of August 2012 stood at 671.95 million vis-a-vis 679.05 million in July 2012. Of the 7.1 million lost subscribers, Bharti Airtel, Vodafone, and Idea Cellular -which account for more than 68 percent of the total market-lost over 5 million subscribers in August.

The recent approach by operators to boost ARPUs is a deviation from the approach they have so long taken of adding subscribers to their network. Industry experts say that this approach can only be beneficial for the operators as well as for subscribers.

"In India we have this problem of multiple SIMs with a single subscriber. So, we have people sitting on a number of SIMs to avail a scheme available in market or because they got it for free,' says Matthew, adding, "This creates a lot of unused numbers and a load on the operator network. So, it's a good thing that the sifting has begun."

Matthew says much of this excess of SIMs with a single subscriber was generated because of the insane competition in the industry but as business slows down and operators concentrate more on earning more revenue, the ARPU approach is a good one.

"As a general rule members are now focussing on revenue generation per user because ultimately the valuation of a company is based on it. This will also bring a lot more sanity to the market amid competitive pressures," he said.

Ankita Somani, IT and telecom analyst at Angel Broking, agrees.

"The increasing subscriber base every month was misleading in the first place and it's good that inactive users are getting cleared," Somani told Firstpost, "This trend gives us a clearer picture of every telecom player, its actual subscriber base and the teleldensity of every circle."

And while Somani thinks that the operators' new approach will help improve their ARPU profile, it will not make much difference to their bottom line in terms of revenue.

She said that operators' revenue profit will neither be given a fillip nor dragged down as the operators are only sifting out inactive users who were in any case not getting them any revenue.

COAI's director general, Matthew, explained that the process of disconnecting and clearing its database by operators is due to many cumulative factors. "The DoT has asked operators to clear their database of unused numbers as there is a crunch of supply in numbers-so that is driving a lot of it. The government has also stressed and made procedures to acquire and have a cellphone number more stringent. If someone has changed address and they can't be identified the operator has to disconnect the number for security reasons," Matthew said.

"But, I don't think this activity per say will hurt anyone's bottomline and in the long run it is more helpful to subscribers than hurtful," he said.

So, while the trend of operators doing away with customers who aren't active will continue, possibly shaving off more of those subscriber numbers, it's not all gloom for the sector.

According to the TRAI, the number of active subscribers (customers who made at least one revenue call in the last 60 days) rose from 695.8 million in June to 698.08 million in July, an increase of three million in a month and 76.42 percent of the total subscribers compared to 74.49 percent in June.