Why operators with minimal subscriber base can opt to exit

Telcos such as Loop, Etisalat and Videocon have done little to churn the subscriber base.

Loop Telecom, one of the new operators which had received a licence for services in 21 circles in January 2008, had a total subscriber base of only 1,202 as on January 2011 in the eight circles where they have offered services so far.

The company saw its subscriber base go up to 227 between December and January. This is in striking contrast to the fact that just the incremental subscriber base in the same period for GSM players went up by 13.7 million.

The low numbers are significant, as it provide the key to why companies such as Loop have offered to auction their spectrum and licence to the Supreme Court. The company has also requested the government to return the Rs 1,454 crore they spent for a pan-India licence and keep the remaining amount.

The Loop offer could be an attractive alternative for new operators, who failed to garner subscribers and rope in strategic investors with the hope that they would pay high premiums. Also, these companies had not made any substantial investments to roll out their services, which has come under scrutiny of the regulator, which has already asked the government to cancel many of the licences.

Etisalat-DB Ltd, which has also come under the scrutiny of investigators, has managed to get a subscriber base of only 452,574, though it claims it operates in 15 circles. The company has been able to increase its net additions in January by a mere 187,675, despite a net addition in the subscriber base in January in the GSM space of 13.71 million. In terms of its market share, which is irrelevant, it is a mere 0.08 per cent in the GSM space.

The story of Videocon is similar. They, too, have shown negative growth in the subscriber base after launching services in 16 circles. So in January, the company declared it had six million subscribers which is a substantial drop of around 18 per cent over last December, losing 1.3 million customers in one go from key markets like Tamil Nadu, Haryana, Mumbai and Kerala.

Only two of the new operators have been able to hold on to their own. Uninor is already a force to reckon with and has garnered 20.3 million customers in January, grabbing around a 3.6 per cent of the GSM mobile market. And S-Tel, which operates from only five circles, has a customer base of 2.51 million as in January.