Opinion Taking a call on telecom subscribers

The first-ever decline in India’s monthly telecom subscriber base will ring the alarm bells for the industry. The drop comes just two months ahead of an expected bruising telecom auction for 2G spectrum. In a way it seems to bear out an expectation that the sector has got hit at its most vulnerable point —the growth in top line. However,whether that indeed is the case will have to wait for the numbers for at least one more month to come in. For July,Telecom Regulatory Authority of India (Trai) data shows over 99 per cent of the fall has been contributed by one wireless operator,which decided to deactivate inactive subscribers.

Trai data shows overall telecom user base of the country dropped by 20.71 million subscribers sequentially. Of the total fall,20.61 million came from wireless subscriber with Reliance Communication being the largest contributor to the fall with a loss of 20.48 million users. The reason for the fall in Reliance’s subscriber base has been because it decided to deactivate the inactive prepaid subscribers,who have not had any usage in the last 60 day. These numbers account for 13.2 per cent of its total subscriber base. But after Reliance Communications,which is the third largest company in terms of telecom subscribers,lost 13.2 per cent due to its decision to deactivate inactive consumer,will other companies dare to tread this path in an industry that churns around 16 per cent of its consumers every month?

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Around 30 per cent of its total subscribers in the telecom industry in India churn at a rate of 16 per cent monthly that means the industry churns around 100 per cent every six months. This churn has impacted the net addition in number of subscribers by around 90 per cent and also brought down the earnings of telecom companies from new subscribers during the first quarter by around 50 per cent. These subscribers are at the lowest end of the ARPU (average revenue per user) chart for the company. This means,say for a company like Airtel whose ARPU is less than Rs 200,now these subscribers provide even less than that. And the churn in numbers mean they do not add to the growing base of subscribers too. Possibly then this is the time the industry should take a call on whether it would be happy with the numbers and the churn or clean their subscriber base and move ahead to a more promising consumer base.

mihir.mishra@expressindia.com