The telecom sector incumbents seem to be a sorry lot. The linear drop in the telecom tariffs over the past 20 months, kicked off by Reliance Jio, has hit their topline and bottomline to a great extent. The adverse policies from the telecom department and telecom regulator TRAI have further dealt a body blow. If this wasn't enough, the legacy operators are now facing another big challenge: the steady loss of high-value postpaid subscribers.
For a long time, telcos like Vodafone, Airtel and Idea Cellular boasted of their loyal base of postpaid users. The TRAI data shows that the postpaid subscriber base has been gradually shrinking. For instance, the number of postpaid users stood at 50.48 million in December 2017, down by 2.23 million from a year ago. In terms of percentage of the total telecom subscribers (1149.81 million), the postpaid users were just 4.39 per cent in December 2017. In September 2016, the month Jio started its services, the comparable number was 4.87 per cent.
Postpaid subscribers are smaller in number but they contribute significantly to the telcos' revenues. In the quarter ending December 2017, the postpaid subscribers paid, on an average, Rs 348, which is 5.19 times the average monthly recharge amount of the prepaid users (Rs 67). The postpaid users ensure a steady flow of income to telcos as against prepaid subscribers who top-up phones as per their needs.
The usage of postpaid users - calls, data and SMSes - are typically higher than prepaid subscribers. For instance, the postpaid minutes of usage was 786 in December 2017 as compared to 481 minutes for prepaid. Similarly, the number of outgoing SMSes for postpaid users was 59 as against just 15 for prepaid users.
The loss of postpaid users is a big deal for telcos. The telcos are trying hard to retain these subscribers by offering customised plans. Market leader Airtel and Vodafone have also started to roll over the unused data of postpaid subscribers. "We also made our postpaid proposition more attractive by widening our store footprint, family proposition and simplifying national and international roaming to prevent bill shocks," said Airtel CEO (India and South Asia) Gopal Vittal in the company's 2016/17 annual report.
The migration of postpaid to pre-paid is driven by highly-competitive pre-paid plans offers by almost all telcos. For instance, Airtel's Rs 499 pre-paid plan offers unlimited calls (STD and local), free roaming, 100 SMSes per day, and 2 GB data per day for 82 days. In comparison, its Rs 499 postpaid plan offers unlimited calls (STD and local), free roaming, 40 GB data, and Amazon Prime one-year membership in every bill cycle (which is typically monthly). Jio's Rs 498 pre-paid plan is offering even more: unlimited calls (STD and local), free roaming, 100 SMSes per day, and 2 GB data per day for 91 days.
Not just value-conscious users, but most postpaid subscribers seem to be taking a hard look at their "inflated" bills.