The decline in reported telecom subscriber numbers is the start of a clean-up process, which is good for the industry.

The country’s total telephone subscriber base has registered a fall for the first time since the introduction of mobile services, with July numbers at 945 million, as against 966 million for the previous month. There is nothing disturbing about this decline though, despite it amounting to practically the average number of subscribers that the industry was adding every month till early last year. One would, in fact, go even as far as calling the decline a healthy trend that presages a transition from quantity to quality of subscribers, necessary for the future growth of the telecom industry in India. Moreover, one needs to understand the real reasons for overall subscriber numbers coming down. When the initial cellular mobile service licenses were given out to private players in 1994, the Government also bundled 4.4 MHz of spectrum along with these for each operator. But in 2002, the Government also started allocating additional spectrum to operators, based on a subscriber-linked criterion. On achieving a particular subscriber number milestone, the operator would be granted extra spectrum of 1.25 MHz without having to pay any upfront fee for these incremental airwaves. Over a period, he could, thus, keep accumulating spectrum by showing more and more subscriber numbers.

The above system, needless to say, generated perverse incentives for operators to over-report subscribers or simply dump SIM cards into the market to qualify for additional spectrum entitlements. Nor did the Government undertake any serious audit of the numbers provided by the operators; so long as they were keeping services affordable and spreading it beyond urban centres, it seemed content with the arrangement. But the party ended with the 2G spectrum scam breaking out and the Supreme Court, in February this year, pronouncing that spectrum, henceforth, can only be auctioned. That included even the incremental 1.25 MHz spectrum chunks being given out on meeting specified subscriber milestones.

The result is that today operators see little sense in bearing the cost of offering services to those who do not pay even Rs 10 a month. They have already started deactivating such subscribers. This is reflected in the Telecom Regulatory Authority of India’s latest data, which, while showing a dip in the overall wireless subscriber base, also reveals an increase in the number of ‘active’ connections from 696 million to 698 million between June and July. But ‘active’ refers to users who make calls at least once in 60 days. The fact that almost a quarter of subscribers do not conform to even this liberal definition now – and the monthly average revenue per user has just about crossed Rs 100 – only points to the extent of weeding out that is still remaining to be done. That clean-up process has just begun. The days of consumers getting lifetime prepaid SIM cards and being counted as subscribers even without recharging for six months are clearly over. And nobody, least of all the industry, needs to complain about that.

(This article was published on September 13, 2012)
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