Subscriber norms put Rs.1k-cr strain on telcos

Written by Anandita Singh Mankotia | New Delhi | Updated: Nov 19 2012, 07:28am hrs
Firms need to employ 5-7k workers for compliance

It is not only higher spectrum costs that is worrying the mobile operators. Close on the heels of tougher guidelines for selling value-added services (VAS), operators have now been hit by tougher subscriber verification norms, which would put a financial burden of around R1,000 crore on them since they would require employing an additional 5,000-7,000 staff for the purpose.

Beginning November 9, the Department of Telecommunications (DoT) norms for subscriber verification put a stop to the practice of issuing pre-activated SIM cards even after complete application forms and identity proofs are submitted. The operators are now required to physically verify the antecedents of the subscribers by their regular employees rather than through outsourcing. Only after this process is complete can the connection be activated.

These guidelines are in response to the Supreme Courts direction to DoT and the Telecom Regulatory Authority of India in the wake of security concerns raised by a public interest litigation.

The operators say that this is a double whammy. One, newer customer acquisition would be slowed due to the lengthy and cumbersome process and two, their costs would go up as they would have to employ more staff for the purpose.

We shared our concerns with the government on how this kind of a lengthy procedure will not only increase costs for the industry but will also cause inconvenience to SIM card applicants by increasing the time, Rajan Matthews, director general of the Cellular Operators Association of India said.

The development comes soon after operators were hit by tougher guidelines to sell VAS services like ring tones, caller tunes, GPRS and music on demand. The new regulation has made it mandatory for operators to seek double confirmation from users, both prepaid and postpaid, before activating any VAS services on their cellphones. Now operators have to obtain the consent of the subscriber either through an SMS, calls to any toll-free number, fax or email before the services can be activated. Further, if subscribers by mistake press any key that activates such services, there should be an immediate process in place to get such services deactivated.

As a result of the measure the operators had to bring in all VAS services under their ambit whereas earlier they were outsourced. The damage was once again twofold: One, they had to make investments worth Rs 1,000 crore to bring the VAS services in their fold and two, take a hit of Rs 5,000 crore every year in terms of revenues from such services.

During the September quarter, when the new VAS guidelines kicked in, all the operators saw slower growth. For instance, Bharti Airtel's VAS revenue as a percentage of mobile revenue fell to 10.1% from 10.8% in the previous quarter and 12.2% the year before. Vodafone while announcing its quarterly results too complained of lower revenue growth in the second quarter owing to the new VAS guidelines.

Something like a caller tune is an impulse decision by a subscriber and when you hound him several times whether or not to activate the service, it can be off-putting for the user, a senior official in the VAS team of a leading telco said.