Prepaid users go slow, telco revenues hit

Lakshmi Gupta, a 35-year-old shopkeeper in the New Delhi’s Connaught Place, is not so busy these days. A fortnight after Prime Minister Narendra Modi banned big currency notes, Gupta, like many others who sell prepaid mobile phone recharge cards, continues to see the business slide.

Estimates suggest pre-paid users make up for around 90 to 95 per cent of the one-billion-plus mobile base in the country, and the sale of recharge cards is down by at least half in two weeks as consumers check their discretionary spend after demonetisation.      

Largest telecom service provider Bharti Airtel with more than 260 million customers, of which close to 94 per cent are using pre-paid connection, has experienced a 10 to 12 per cent fall in revenue since November 8 when the PM made the unexpected announcement, sources said. Bharti Airtel declined to comment on the matter. 

Analysts indicated the telecom sector is likely to see greater pain in the coming weeks, as a fallout of demonetisation. 

In fact, Cellular Operators Association of India (COAI) in a letter to the government has said that a large number of citizens are finding it difficult to recharge their prepaid accounts due to their inability to obtain replacement currency. The association wants the government to allow telcos to accept Rs 500 and Rs 1,000 demonetised currency notes till the time replacement is available.

Sources said Reliance Jio, which has already given competition to older rivals, would face a challenge too due to demonetisation. Jio is scheduled to formally launch its commercial service in December. Company executives said, “we are not billing yet. So there’s no question of any impact.’’  

In September, Reliance Industries announced free voice calls — both local and roaming — and data at low rates of Rs 25-50 per gigabyte (GB) through Reliance Jio Infocomm.    

The demonetisation will impact the revenues of the telecom companies to the tune of 7-8 per cent and if it continues for a longer duration the impact would be much more, Prashant Singhal, global telecommunications leader at E&Y India told Business Standard.

However, some other telecom experts indicated that other sectors may be hit much more. “Telecom spending is not as discretionary as say, eating out, fashion or entertainment. People with tight budgets might ration telecom use, but cannot manage without the service altogether,” Mahesh Uppal, independent telecom expert, said.