Mobile customers shying away from post-paid

Only 3 per cent of the subscriber base is in post-paid

Bhaskar Hazarika

New Delhi, Dec 16 2009

India is set to cross 500-million mobile phone users by the end of the year. But just about 3 per cent are still logged onto the post-paid story. This means a mere 15 million consumers actually pay regularly on a monthly basis for their connection. The rest, a staggering 485 million, are literally free birds who charge their phones with denominations they deem fit.

This explains the steep fall during the past five years in postpaid connections. The prepaid subscriber base has grown from 84 per cent five years ago to more than 97 per cent today. Majority of the 15 million existing postpaid connections fall in a particular socio-economic category that pre-supposes a mid to high-income level segment.

The 15 million figure is an interesting pointer to the actual size of the Indian middle income groups, especially viewed in context of the fact that India as of today has close to 35 million income tax payers (as on March 31, 2009), 10.2 million Demat account holders and 12 million registered passenger vehicles.

The shift from post-paid to prepaid has an explanation. T R Dua, director general of Cellular Operators Association of India, in an email communication, told Financial Chronicle, “There has been an increase in prepaid subscriber base as the service providers are increasingly expanding to the rural areas and are acquiring more and more subscribers from the bottom of the pyramid.”

He predicted the migration trend to continue arguing, “Prepaid would continue to be the preferred choice, as it is economical and enables the rural subscribers to control their costs. Prepaid also enables service providers to reduce their bad debts.” Easy availability and accessibility of prepaid mobile cards was also encouraging migration from the postpaid model to prepaid.

An analysis of the latest subscriber data suggests that the decline in the postpaid subscriber base is also evident from the fact that more and more new subscriber additions are in the prepaid segment.

Telecom operator Bharti Airtel has a prepaid customer base of 95.2 per cent as on quarter ended September 2009. The prepaid subscriber base for the company increased from 92.9 per cent in September 2008. At Reliance Communications, for the quarter ended September 2009 the prepaid subscriber base stood at 94.4 per cent. For that quarter the net subscriber additions in the prepaid was 99.2 per cent.

“In the past five years, the telecom subscriber pattern has witnessed a paradigm shift from postpaid to prepaid regime due to the competitive tariffs and innovative offers by operators, making universal rates for prepaid and postpaid,” director (telecom) of KPMG, Romal Shetty said. He added that the Indian telecom market, which started with a dominant postpaid subscriber base, is eventually witnessing the phenomenal growth of the prepaid category.

“Earlier prepaid call rates were higher compared with postpaid. However, as the market is maturing, the call rates have gone cheaper making it equivalent to post paid. There are three major reasons why the prepaid model is picking up in India-- quick availability, easy documentation and fast activation of service. At present, only a small per cent of the corporate employees are on the postpaid platform,” Shetty said.

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