Mobile companies are ejecting non-revenue generating subscribers out of the network.

If you are someone who has taken a mobile connection, but rarely use it, chances are that soon you will be disconnected. The reason being that mobile operators have moved from quantity of subscribers to quality.

Prior to February 2011, the Industry’s net subscriber addition per month was around 20 million. In June 2012, this came down to just about 5 million. The reason for this decline in growth is primarily due to deactivation of inactive subscribers, which the operators report as ‘churn’. Churn is the percentage of subscribers exiting the operator’s network willingly or by force. Tata Teleservices, for instance, reported net loss in subscribers across 6 months between July 2011 and April 2012.

For example, Airtel’s churn rate has increased from just about 5.8 per cent in the first quarter of 2010-11 to 8.8 per cent in the fourth quarter of 2011-12. Idea Cellular’s churn rate has moved up from 8.2 per cent to 9.9 per cent during the same period.

Given that both these players are net gainers as far as Mobile Number Portability is concerned, the only plausible reason for the higher churn is deactivation of inactive subscribers.

This is a far cry from just a few years ago when telecom service providers used to provide Life time pre-paid SIM to the subscribers. As a result, even if a customer did not recharge for six months, he would still be counted as a subscriber. But now operators have started disconnecting subscribers who do not use their phones for more than 60 days together.

There are multiple reasons why mobile companies have changed their tactics. For one, spectrum allocation rules have changed from subscriber linked criteria to auction. Earlier operators could get more spectrum if they amassed more subscribers. But now with auction being the preferred allocation method there is no incentive for operators to bear the cost of offering services to someone who does not even pay Rs 10 a month. The other major reason is shortage in phone numbers after the Department of Telecom tightened the allocation criteria in February 2011. The department now gives numbers based on active users instead of the total user base.

As a result of the clean-up exercise being undertaken by all operators, the percentage of active users has gone up from 70 per cent in 2011 to 75 per cent now. This has propped up the Average Revenue Per User (ARPU) for telecom companies for the first time in many years. According to the Telecom Regulatory Authority of India, operators got Rs 100 a month from each user on an average during the September- December 2011 quarter compared with Rs 98 in the previous quarter.

Though the increase is marginal, this is good news for telecom companies that have been dealing with declining revenues for the past two years.

(This article was published on August 2, 2012)
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