India Telecom Operators Cull Unprofitable Numbers; Users Drop by 9.38 Million

Date : 12/18/2012 @ 8:23AM
Source : Dow Jones News
Stock : Vodafone Grp. Plc ADS Each Representing Ten Ordinary Shares (MM) (VOD)
Quote : 28.98  0.05 (0.17%) @ 8:00PM
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India Telecom Operators Cull Unprofitable Numbers; Users Drop by 9.38 Million

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  By R. Jai Krishna 

NEW DELHI--The number of cellphone users in India shrank by 9.38 million in November, with operators culling unprofitable subscribers who haven't used their phones for more than 60 days at a stretch.

The slide also includes numbers which have been deactivated because of tighter security regulations requiring telecom companies to verify the identity and address of all subscribers.

Bharti Airtel Ltd. (532454.BY) alone reported 2.8 million fewer mobile phone users for November while Vodafone India Ltd. -- a unit of Vodafone PLC (VOD.LN) -- followed close behind with a 2.38 million fall, according to data released Tuesday by the Cellular Operators Association of India.

The COAI represents operators employing the global system for mobile communications, or GSM, telecom technology, which is used by about 90% of India's cellphone customers.

November's losses bring the total number of users subscribing to GSM cellular services in India to 663.78 million, down 1.34% from October.

Industry analysts say, however, that the culling is a positive for India's telecom companies because most of these subscribers do not use the connections regularly anyway. For example, some take up new numbers just to use the free minutes offered with a connection.

Deactivating these numbers will free up the networks to take on more paying customers.

In the long-term, this will result in increased average revenue per user, said Deepak Kumar, founder analyst at

Average revenue per user, or ARPU, is a key measure of profitability for wireless companies.

Mr. Kumar expects the losses to develop into a trend that could result in companies reporting an average loss of 4-5 million users for the next 18-24 months.

Bharti's chief executive for South Asia, Sanjay Kapoor, said the new rules will help operators cut costs on sales, which the industry needs "desperately."

Vodafone India and Idea Cellular declined to comment.

Since Nov. 9, India's telecom operators have been barred from allowing users to make phone calls until their details are verified. This is in sharp contrast to the earlier practise, when consumers could buy pre-activated phone connections from a retail outlet.

Also, the telecom companies continued to reduce marketing spending and sales commissions -- which they give to retailers to gain new users -- in an effort to cut costs.

Apart from Bharti Airtel and Vodafone -- India's largest and second-largest telecommunications operators by users -- all but one operator lost subscribers in November.

Idea Cellular Ltd. (532822.BY) lost 1.56 million users while Unitech Wireless Ltd., the local unit of Norway's Telenor ASA (TEL.OS), lost 437,915 users.

In October, Idea had gained 239,348 new subscribers while Unitech Wireless had added 1.11 million subscribers. Telenor India's receding user base can be attributed also to its decision to limit its operations to six of the country's 22 telecom service areas.

In November, state-run Mahanagar Telephone Nigam Ltd. (500108.BY) gained 754 users, compared with a net 13,652 new users in October.

Bharti's total mobile phone user base fell to 186.41 million subscribers at the end of November, while Vodafone India's shrank to about 150.76 million users, said COAI.

In October, Bharti had added 491,570 new users and Vodafone India 480,336.

Operators such as Reliance Communications Ltd. (532712.BY), and Tata Teleservices Ltd., which provide telephone services using the code-division multiple access, or CDMA, technology, had earlier removed several users from their networks.

Reliance Communications dropped 20.4 million subscribers in July as they didn't use its services for 60 days.

India, the world's second-largest telecom market by users after China, is a key region for international phone companies and equipment suppliers.

Bharti shares Tuesday closed up 4.23% at 313.15 rupees ($5.71) while Idea Cellular ended 0.48% higher at 95.15 rupees.

In comparison, the Bombay Stock Exchange's Sensitive Index closed up 0.63% at 19,364.75 points.

Write to R. Jai Krishna at

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