Telcos shift focus from user base to revenue

Mumbai: Tata Teleservices CEO N Srinath has been on a restructuring drive ever since he took charge at India's sixth largest telecoms company in February this year. Srinath has recently combined the GSM and CDMA business units and is now hanging up on inactive subscribers. This probably explains why the company lost nearly 2.7 million customers in July, according to data provided by Association of Unified Telecom Service Providers of India (AUSPI). It has been one of the biggest single-month declines for any top mobile services provider in India's telecom story obsessed with subscriber additions. Mobile number portability (MNP), which has set off a subscriber churn among telcos, also contributed to this fall. MNP allows subscribers to switch operators without changing their numbers. 

The revamp, said sources, is to drive efficiencies and profitable growth. The company's focus is on value (higher ARPU) and not on volumes to boost growth. Average revenue per user is a key indicator for operational income.      "The relevance of subscriber numbers is slowly losing its significance in the Indian telecom space. Every quarter we are seeing moderate growth in user additions but thing like minutes of usage is growing in a healthy manner for all top operators. Along with this, the tariff hikes will only help in shaping up a positive outlook for the sector," said Prashant Singhal, telecom leader, Ernst & Young, a global consultancy firm.      Earlier, spectrum was allotted to telecom companies based on subscriber numbers. And so companies padded up numbers to gain spectrum. But now that has become irrelevant and with limited spectrum in hand, operators want to concentrate on high-revenue customers.      Tata Teleservices counts active subscribers as those who make or receive at least one call a month. Removing inactive users will help in freeing up mobile numbers, sources said.      In mid-2009, Tata Tele launched its pay-per-second scheme, which helped in adding 30 million customers to Tata Do-CoMo which operates on the GSM platform. Its other brand is the CDMA based-Tata Indicom. The company has around 88 million customers as of July 2011, according to AUSPI.      "Although, it (the huge drop in Tata Tele's users) is an unheard of phenomenon, barring a few players like Videocon who have earlier lost subscribers, there is a rationale behind getting out inactive users from one's network. The industry is fast moving to the revenue market share model where low-revenue customers will be weeded out," said a telecom analyst with a foreign brokerage. Other telecom players are also travelling on the same path as that of Tata Tele and are focusing on high revenue customer base.      The telecom industry has witnessed a sluggish growth in terms of subscriber additions over the last few months. The COAI (Cellular Operators Association of India) said total subscribers addition stood at 7.6 million in July 2011 against 8.5 million in June 2011, which was the lowest addition in the last two years.