The Hindu Business Line : ARPU levels for cell firms close to ‘unviability’ mark

Alarm bells may have started ringing for mobile operators with the average revenue per user (ARPU) inching closer to the Rs 200-mark, below which operations are considered to be unviable. With mobile operators announcing a slew of tariff reductions in the long distance segment and roaming services, the ARPU for GSM operators during the January-March quarter has declined further by 5.7 per cent from Rs 316 in the previous quarter to below the Rs 300-mark for the first time, while the CDMA-based operators are already hovering around the Rs 202-per-month mark.

Benchmark

ARPU is widely considered to be one of the benchmarks keeping a tab on the financial health of telecom operators. While globally, operators have an ARPU of around $15, Indian operators — offering the cheapest tariffs in the world — are dangerously close to the $5-mark. One of the reasons for the low ARPU is the high proportion of pre-paid users in the country who do not spend more than Rs 250 per month on an average compared to a healthy Rs 613 by post-paid subscribers.

According to the industry performance indicator from the TRAI, 87 per cent of the subscriber base is using pre-paid cards.

Performance indicator

However, telecom analysts said that operators do not have much to worry as long as valuations are skyrocketing. “Look at the valuations that the operators are getting and that gives a good idea that the financials are in good shape. Operators are doing the needful to cut down on the capital expenditure and operational expenditure such as infrastructure sharing, which enables them to compete at a lower tariff. The exponential growth in subscribers and volumes also has positive impact on operator’s revenue,” said an analyst.

Impact

Mr T.V. Ramchandran, Director-General, Cellular Operators Association of India, however, said that lower ARPUs would impact the availability of surplus funds at a time when operators are looking to expand their network in a bid to improve the penetration levels in the country.

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