Chipping away at prepaid balance

When one pays insurance premium, the insurance company does not treat the entire amount as income if the policy cover, usually for a year, does not coincide with the financial year of the insurance company. For example, a person taking a motor insurance policy on 1st March 2011 enuring for twelve months would for the financial year April 2010 to March 2011 give only 1/12 ^th of the premium amount as income for that year to the insurance company which has to bide its time before it can treat the remaining 11/12 ^th as its income. In other words, in its balance sheet as on 31st March 2011, it is going to disclose as much as 11/12 ^th of the premium as liability, bulk of the premium having been received in advance. Prepaid insurance then is the insured’s asset and insurer’s liability.

But can an unsuspecting prepaid mobile phone subscriber similarly relax in this sobering knowledge? To be sure, the amount of say Rs 3,000 he pays to his prepaid account might allow him full talk time with a generous validity period of full twelve months thrown in but little does he know that his balance could be facing a daily assault chipping away little by little what he had put in, in advance. Telecom companies take the prepaid subscribers for granted whereas they need to be kinder if not beholden to them. There are schemes and schemes in the name of value added services which most of the benighted prepaid subscribers do not pay heed to much less subscribe. But the wily telecom companies have the gumption to dip into their balances, permission or no permission, and squirrel away a tidy sum over a period of time. A value added service to which one might not have subscribed might cost Re 1 per day, and without the subscriber’s knowledge his account might be suffering steady erosion at the rate of Re 1 per day. And in one full year, he might have lost Rs 365 for services he did not avail and subscribe. The enormity of the fraud hits one hard when its snowballing potential is taken into account---subscriber base of say one lac which is a gross underestimation. The benighted subscriber hardly bestirs much less protests which is why he is taken for granted. He does not even remotely suspect such quiet stealthy filching by the telecom company. If somehow he becomes aware of the steady erosion of his balance and he picks up the phone once for a stern action, the Telco equally quietly, in a dulcet voice oozing injured innocence asks him whether he is not happy with the value added service but it nevertheless dolefully but kindly deactivates him from the service respecting his wishes. Touché! And such rearguard retrieval actions are few and far between. The Telcos laugh up their sleeves.

But this is no laughing matter. A prepaid subscriber is doing an enormous favor to the Telco. He squelches the bad debts problem associated with post paid accounts. He considerably reduces the collection costs and most importantly allows the Telco to enjoy interest-free funds. For this act of magnanimity, he ought to be rewarded but what is in store for him is exactly the opposite---filching. He ought to be given a concession in rates vis-à-vis his post-paid counterpart which doesn’t seem to be the case.

The concept of prepaid account originating with Telcos is so alluring that some power distribution companies are toying with, and salivating at, the idea of switching to the prepaid mode lock, stock and barrel. Traditional electricity meters show units consumed but those buying prepaid vouchers would get to see their balances as well a la the balance in their mobile accounts after each call they have made or each message they have sent. Frugal householders now fume when the meter ticks alarmingly and switch off the air conditioner pronto braving the oppressive heat but mindful of the shrinking bank balance and purse. When prepaid electricity connections become the norm, they will look over their shoulders more often and with greater alarm because a shrinking prepaid balance is more galling than the galloping meter per se because of the accentuating effect and the double-whammy of a galloping meter especially if triggered by electricity company’s shenanigans, fuelling furious depletion of account balance cannot be good to anyone’s blood pressure and equanimity. For, to rubbery legs watching one meter soar and balances with two entities recede all in one go is too great a calamity to bear. Levity aside, the concept of prepaid is a Godsend to the business community and it should not kill the goose that lays golden eggs with its cupidity and avarice.

Those paying in advance need to be rewarded. After all, the recipient is benefitting immensely from the advance which is why the wealth tax law calls upon deposits taken by landlords to be factored into the value of the house. It would perhaps be in fitness of things if the telecom regulator TRAI mandates Telcos to provide for interest in the prescribed manner so as to swell the prepaid balance if their intransigence and avarice continue unabated. As things stand, the Telcos are forfeiting the balance of goodwill by filching from the prepaid account balances.

We have approximately sized up the quantum of loss arising out of 2G spectrum allocation though the jury is still out on the exactly quantum of loss. But it would be useful if an audit were carried out of the aggregate amounts filched by Telcos from unsuspecting prepaid customers over the years. One suspects it won’t be small. One hopes the ushering in of the long awaited number portability regime would halt the rampaging Telcos in their tracks.

(The author is a Delhi-based chartered accountant).

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