Pre-paid Cellular Services On A Roll Post-IUC

Mumbai: | Updated: Jun 27 2003, 05:30am hrs
The cellular services market in India has come a long way in the last eight years of its existence. Today, the market boasts of 1.41 crore subscribers and is growing at a healthy rate. During May, almost 8.5 lakh new subscribers signed up with various service providers across the country.

Significantly, around 80 per cent of new subscribers today are in the pre-paid category. At this stage, the break-up between pre-paid and post-paid is in the ratio of 65:35. Bharti Cellulars chief operations officer (COO) for the Mumbai circle Atul Jhamb points out that the movement towards pre-paid is an international trend. The new user will opt for pre-paid, he says.

With the Interconnect Usage Charge (IUC) coming into force from May 1, incoming calls for cellular users are today free. Sources in the trade explain that this has given a tremendous fillip to the industry and this explains the large number of additions each month. Not surprisingly, most new users are clear about going in for pre-paid, says one distributor.

The reasons for this are not too difficult to guess. According to Essar Teleholdings CEO Vikash Saraf, there are two factors driving the growth in the pre-paid segmentno element of credit and the ability to control oneself. The advantage to the operator is that service costs are not an issue, he explains.

BPL Mobiles COO Krishna Angara is clear that the market is moving towards pre-paid. The subscriber today is looking to control his expenses and this is a great way of doing it. Moreover, with incoming calls becoming free, a user does not have to refill the card if he has to receive calls, he says.

There has been some apprehension in the industry about not being able to have a relationship with the pre-paid user. As Mr Saraf says, The user does not receive a bill. Therefore, the degree of customer relationship is lesser. This gains significance as cellular operators are devoting a large amount of their time and effort towards customer relationship management exercises.

For the operator, the biggest plus point is that there are no delinquent customers. The worry, however, is that revenue per user (RPU) could take a beating. Interestingly, Mr Angara says that it has become expensive for operators to take care of the post-paid subscriber. Expenses such as those on bill generation, postage, having drop boxes remain. With tariffs falling, our costs per subscriber are at the same levels, he adds.

Logic would suggest that users in the higher end would be in the post-paid category: the reason being that the mobile is extremely vital to them or that the bills are paid for by their organisation.

So, what is the right mix for an operator An operator should have a healthy mix where the marginal user goes pre-paid, says Mr Jhamb. In some cases, points out Mr Saraf, subscribers have migrated from post-paid to pre-paid. What is important is that the core base of high usage customers is in place, he sums up.