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Thomas K. Thomas

New Delhi , May 8

DESPITE falling tariffs, most cellular operators are in black. The cost per subscriber, incurred by cellular operators, has fallen drastically from Rs 992 per month in 1999 to Rs 210 in 2004.

According to a study by PricewaterhouseCoopers (PwC), incremental subscribers have been pulling down the operating cost per subscriber consistently. In the last one year, the cost per subscriber has decreased by 27 per cent.

The biggest drop in costs was during 2000-2001 (from Rs 845 per subscriber per month to Rs 453).

While operators have been concerned about the falling average revenue per user (ARPU), the drop in cost across various parameters has been beneficial. For instance, the cost of operating networks decreased from Rs 377 a month per user in 2000 to Rs 62 in 2004. Similarly, the cost incurred for sales and marketing has come down from Rs 204 per user per month in 2000 to Rs 90 in 2004. Personnel costs have dropped from Rs 101 per month to Rs 31, while administrative costs have declined from Rs 163 per user per month to Rs 27.

According to PwC's study, there has also been a significant improvement in bad debts. Bad debts, as a percentage of net service revenue, reduced from 6.5 per cent in 2003 to 3 per cent in 2004. The decrease in bad debts is due to the stabilisation of cellular operators, according to a study commissioned by Cellular Operator's Association of India. In fact, bad debts for old licence holders is down to 2.5 per cent of the net service revenue.

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Cell firms' operating costs keep declining

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