Telecom retailers make hay while the industry whines

Subscriber churn costs operators heavily, retailers make ~7.7k cr a year

MAKING A KILLING 75-80 million Gross addition of subscribers per month
for all operators put together

15-16% Monthly churn rate in the industry 100 million Subscribers at the bottom could be switching
operators every month or two; every operator is chasing them

6.5% Revenues spent to maintain subscriber base ~7,700 cr The amount retailers make annually as commissions
SURAJEET DAS GUPTA
New Delhi, 23 September

Telecom retailers are earning nearly ~7,700 crore annually as commissions from telcos, thanks to the huge monthly subscriber churn rate and the popularity of mobile number portability among users. There are nearly a million retailers who sell SIM cards across the country. In FMCG such as soft drinks, for instance, the nearly three million retailers make around ~3,000 crore annually as their share or margin in the business, according to the industry. And, unlike in telecom, they have to share the costs of storage. On the other side, mobile operators, engaged in cutthroat competition, fork out nearly ~13,000 crore annually in customer acquisition costs to ensure their subscriber numbers dont fall amid the churn. The amount is a significant 6.5 per cent of the total gross mobile revenue of operators put together (around ~2 lakh crore). The churn rate is calculated as the number of subscribers who get out of an operators network in a month as a percentage of its total subscriber base.

Net subscriber addition every month is two-three million. It slipped into the negative zone last month. Gross addition of subscribers by the industry every month ranges 75-80 million. Says a worried Sanjay Kapoor, CEO of Bharti Airtel, the countrys leading mobile player, The high churn and gross additions model is unsustainable for the industry, as customer acquisition has become a monthly business. The industry is on a treadmill till it alters the model for long-term sustainability. The average churn rate was just three per cent per month three-four years ago, despite 95 per cent of the subscriber base being pre-paid. At that time, there were about four operators. With 8-10 operators currently, it has gone up to a staggering 15-16 per cent per month. Operators say of the average acquisition cost of a new subscriber at $2-2.5, about $1.5 is given as commission to the retail trade. They say much of the churn is induced by retailers, who shift pre-paid customers from one operator to another after a couple of months, depending on which one offers better commission.