Cell airtime surges, operators' revenue dips

Indians are talking more on their mobile phones but the cellular operators are not rejoicing as yet.

The use of cellular airtime has gone up by more than 47 per cent from 270 minutes a month per user on average to nearly 400 minutes between January and June 2003.

With free incoming calls introduced from May 1, traffic on this segment has shot up by more than 60 per cent from 150 minutes on average to 246 minutes. Outgoing traffic has also gone up by 23 per cent, owing to the sharp decrease in tariffs.

Despite the surge in airtime use, cellular operators claim the average revenue per user has dropped 10-15 per cent in the first half of 2003.

"The increase in traffic is primarily on the incoming calls, where operators are not getting airtime revenue anymore. The revenue we get in the free incoming regime is not even 50 per cent of what we got earlier," Rajiv Sawhney, chief executive officer of Hutchison Essar, explained.

The other key driver is the increased use by post-paid subscribers. This segment of Bharti, Idea and BPL has crossed 600 minutes of use on average.

Hutch, for instance, has witnessed a surge in airtime use from 100 minutes to 225 minutes a month on its pre-paid cards, while post-paid users are talking nearly 800 minutes, against 500 minutes earlier.

This, however, has not translated into an increase in average revenue per user because post-paid subscribers account for only 35 per cent of the total user base.

Spice Telecom, an operator in Punjab, has seen a decline in its average revenue per user from Rs 640 a month to Rs 505 in the January-June period.

Sanjoy Mohanti, chief marketing officer of Escotel, says, "While net revenue has gone up marginally owing to the large addition to the cell user base, the average revenue per user has gone down since the increase in traffic has not compensated for the drop in tariffs."

Escotel, which operates in Circle B and C states like Kerala and Uttar Pradesh, has recorded an increase of 33 per cent in post-paid use from 350 minutes a month per user to 450 minutes.

Airtime use on pre-paid cards went up from 70 minutes to 120. 

Cellular service firms point out that the drop in long-distance tariffs are also inducing users to increasingly make STD and ISD calls from their cell phones.

Deepak Varma, vice-president and chief executive officer of BPL Mobile, said the company's outgoing STD traffic had increased by 15-30 per cent and ISD traffic by 10 per cent.

However, firms are not too worried about the declining average revenue per user. Sanjay Nandrajog, chief executive officer of Bharti Cellular's Delhi circle, said: "It's only a matter of time before the market corrects itself.

Operators are also focusing on value-added services like SMS, MMS, roaming and other revenue-generating applications to drive up the average revenue per user."

Bharti's cellular brand, Airtel, has seen a 30-40 per cent surge in ISD calls.

Operators are taking consolation from the fact that cellular use in the country is already above international levels.

Himanshu Kapania, chief operating officer of Idea Cellular, pointed out: "According to analysts, developed markets have reported airtime use of not more than 400-500 minutes a month per user. In India, the figure is already touching 600-700 minutes on the post-paid front. This is expected to go up further as tariffs drop."