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Pre-paid key to cell operator growth

Baburajan K

The low cost of adding pre-paid card cellular users, which account for almost 65-70 per cent of new cellular subscribers in the past two fiscals, is expected to drive the revenue growth of mobile operators in the country in future, top cellular operators said.

During 2001-02, India's cellular subscriber-base grew by 80 per cent to touch 6.43 million from 3.58 million. "Around 65-70 per cent of the new additions comprise of pre-paid card users.

Since cellular operators' cost on adding pre-paid users is lower as compared with post-paid customers, shift towards the pre-paid segment will have a positive impact on the revenue-base of all operators," Vikas Saraf, chief executive officer of Essar Teleholdings, said.

In the past few months, the cost on educating cellular users has come down due to the high penetration in the market. Earlier, selling, marketing and advertisement costs were account for a high proportion of revenue.

"Adding a new pre-paid user means less customer care, less billing costs, lower collection costs, zero bad debt to any operator," Sanjay Kapoor, executive director (western region) of Bharti Tele-Ventures, said.

This apart, a large section of pre-paid users tend to migrate to post-paid segment once they become a premium customer. The pre-paid card segment helps mobile operators to woo customers with low entry cost and other attractive packages.

In fact, pre-paid segment is said to be the lifeline of any operator. "Churn levels are low for post-paid users than pre-paid users. Low entry cost, hassles due to verification and control in usage make a customer to opt for pre-paid card," Saraf added.

It is a global trend. Though a vast majority of new users prefer pre-paid cards, the net subscriber-base comprises 60 per cent of pre-paid users with the balance 40 per cent opting for post-paid users.

"From the operators view, we have no preferences and both the segments make a good business," Deepak Varma, president and chief operating officer of BPL Mobile, said.

Increase in usage, new revenue streams by way of providing data services will restrict the fall in average revenue per users.

Data services (especially short messaging services and e-mail) are expected to bring more revenues to the cellular operators. Though metro operators are likely to wipe out accumulated losses in two-three years, break-even would take some more time, analysts said.

Revenue from rentals does not form major part of the revenue-base of cellular operators as rentals are charged to post-paid users only and not to the pre-paid customers. However, operators charge an access fee for availing pre-paid services, which is nothing but a form of a rental. Rentals formed about 39 per cent of the ARPU in fiscal 2000.

HSBC, in its October-2000 report on the cellular industry, said the rapid increase in pre-paid customers is expected to drive the subscriber-base growth. Pre-paid users, which formed about 15 per cent of the total user-base in fiscal 2000, are expected to balloon to 59 per cent of the total users over the next 10 years.

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