Telecom Beyond Aadhaar

Even as political parties take to cellphones to fight the next elections, the numbers are a reminder that the telecom growth story is over.

The noise over the shutdown of Aadhaar-linked KYC verification for new phone subscribers seems much ado about nothing. Not because how much more or less a telecom company will need to spend on paper verification as compared to what is now being cited as a “painless online Aadhaar authentication”. There’s much talk around whether a telecom operator will have to dish out Rs 250 per new subscriber or a fraction of that for paper verification, how large a distribution network one needs to access potential users, and if the physical process would be a drain on time and resources. Keep all that aside and take a hard look at the numbers to piece together the story of Indian telecom.

Consider the telecom universe of 1.17 billion, of which 1.15 billion are wireless subscribers as per the latest data from Telecom Regulatory Authority of India (Trai). Only about 3 per cent of the total wireless user base would fall in the elite postpaid category. The chunk — around 97 per cent — use prepaid services with infinite number of offers to attract deal hunters. That means the arduous physical verification at a subscriber’s address in the pre-Aadhaar days took place only in the case of a minuscule number of postpaid users. It was there that a telco’s cost may have been the steepest in the range of Rs 250 or thereabouts per user. For the massive prepaid base, mostly known as a floating population, the verification cost of a telco in the pre-Aadhaar regime was in low double digits, estimates suggest. Since the ratio between prepaid and postpaid subscribers remains unchanged even after the Supreme Court verdict asking private parties to do away with mandatory Aadhaar-linked verification, the overall cost of telcos is unlikely to shoot up.

But there’s a bigger point. That is, urban India is more than a saturated market (like Europe was a decade ago making India a favoured destination for telecom foreign direct investment) with hardly any room for mobile subscriber addition any more. True that there’s activity still in urban telephony space from month to month, but subscriber addition is more to do with going to another operator’s platform for rock bottom tariff and freebies and in most cases giving up the original connection subsequently. The lag time between the two often gives an impression of overall growth in mobile telephony subscription. Urban teledensity (number of connections for every 100 individuals) as of July 31 was 159.38, of which mobile teledensity in urban areas stood at 154.77. So on an average, everybody living in urban cities and towns owns 1.5 phone subscription. Monthly numbers show promise in rural areas rural teledensity is at 58.45 and rural mobile teledensity is at 58.09.

But before you imagine a rosy rural picture, assess Trai’s latest quarterly performance indicators. It shows the overall teledensity in India declined from 92.84 to 89.72 in the March to June 2018 quarter. Also while urban teledensity dropped from 165.90 to 158.16 during the period, rural teledensity too was down from 59.05 to 57.99.

That there’s no effective subscriber addition is evident in the year-on-year figures. On July 31, 2017, the total subscriber base was 1.21 billion. One year later, it’s down to 1.17 billion. Mobile subscribers are down from 1.18 billion to 1.15 billion and fixed-line from 23.92 million to 22.27 million. But, while urban total has declined from 702.97 million to 658.78 million, rural numbers have inched up from 507.74 million to 520.53 million in a year. Overall teledensity has taken a knock, going down from 93.88 to 90.44 in a year, though rural teledensity moved just about one notch up from 57.45 to 58.45.

These numbers naturally lead us to a pertinent question: If subscribers are not increasing, why is the quality of calls going down so hopelessly? Why is it that even the Prime Minister of the country needs to complain that he’s facing trouble talking? Well, with falling tariffs and decreasing average revenue per user for telcos, subscribers are talking more than usual. While the postpaid minority may depend more on data connectivity than mobile talktime (postpaid minutes of usage declined from 776 to 765 minutes in the March to June quarter in the case of GSM service), the prepaid subscribers have been partying (prepaid GSM minutes of usage rose from 575 to 601 minutes in the same period). – Business Standard