99% of new mobile connections in India are pre-paid

NEW DELHI: Call it the death of post-paid mobile user in the world���s fastest-growing mobile market. India has all but completely rejected the post-paid option, with nearly 99% of new mobile user additions in the country accounting for by pre-paid connections.

With mobile operators increasingly doling out cut-price offers for newer, often poorer users, customers are also embracing this platform with gusto.

Consider this: Bharti Airtel, India���s largest mobile company by user base, added a record 8.1 million-plus new customers during the October-December 2008 quarter, of which 99.6% were pre-paid users. Ditto for Reliance Communications, Vodafone Essar and Tata Teleservices. About 99.9% of RCOM���s 5.5 million new additions in the quarter went in for a pre-paid connection, while for Vodafone Essar and Tata Teleservices, the numbers were 97.3% and 96%, respectively.

���Fundamentally, the Indian consumer prefers pre-paid as it empowers him. The customer wants to control how and when to spend and sees real value on a call-by-call basis in pre-paid,��� said Bharti Airtel���s chief marketing officer Sanjay Gupta.

The switch towards pre-paid from post-paid connections has been steadily climbing. From accounting for about 60% of the country���s total subscriber base in 2005, pre-paid users now constitute over 92% of India���s mobile customer base.
Bharti���s numbers for October-December 2007 quarter show that a little over 95% of new additions preferred pre-paid connections. For Reliance and Vodafone Essar, the comparable numbers were 96% and 92%, respectively, of net customer additions.

Mr Gupta said that pre-paid growth was aided by three factors. ���First, the revolutionary lifetime pre-paid concept has done away with the cost of entry and validity. From Rs 999 earlier, it costs a mere Rs 99 for a lifetime connection, which does not require a recharge to stay connected. Second, unlike most other countries, the consumer does not pay for an incoming call. Third, pre-paid follows a sachet approach as customers can recharge for as low as Rs 5 or Rs 10 when they want to use their mobiles,��� he said.

Vodafone Essar���s marketing head Harit Nagpal says it also suits operators too to have their new customers on the pre-paid platform ���Post-paid customers need verification, credit rating and collection infrastructure in every geographical service. Today, new additions are mostly from rural and interior India, which lacks this infrastructure. Unlike other countries, a significant majority of India���s population do not hold a bank account which acts as a collection infrastructure,��� he said.

Mobile operators also point out that a post-paid connection required a minimum spend ��� known in telcom industry parlance as average revenue per user (ARPU) ��� to be viable. ���Since, most of the new entrants cannot bring in this ARPU, operators want them on pre-paid,��� Mr Nagpal added.

According to a top executive with another GSM player, telcos��� operational expenses increase multiple times when it comes to post-paid users: ���From generating multiple billing cycles depending on the tariff plan chosen by the customer to increased IT deployments to higher manpower requirements, the costs shoot up,��� the executive said.

But, Bharti's Gupta is of the view that rural customers will always choose pre-paid connections. "Typically, Indians start with pre-paid as they are unsure of the usage. Over a period of time, after they are accustomed to using a mobile phone and the tariffs, a small segment switches to post-paid," he said.

Besides mobile customers in India also do got get the usual benefits associated with post-paid connections such as free handsets, lower tariffs and discounts on value-added services which are available in more developed markets. With call tariffs in India already one of the lowest in the world, post-paid connections offer little value to the typical Indian mobile user.