Making up the numbers

Ever wondered why CSPs make such a big deal about subscriber numbers? Are they just showing off, meaning to gall their competitors or just trying to make investors happy? Those of us with just the smallest sarcastic streak may link the fact that the marketing people, the same ones charged with generating new subscribers in the first place, may be justifying their enormous budgets by sprouting big numbers in the press.

Whatever the reason, the number of subscribers attained, by whatever means, is relatively useless unless it can be linked to a commensurate and sustainable increase in revenues, and ultimately, profits. Getting subscribers is only a small part of the battle, keeping them is quite another.

It will, therefore, come as no surprise that those magical subscriber numbers in India, for example, may not be all they seem.  The Indian regulator, TRAI, recently announced that it estimated almost 250 million Indian connections were inactive at the end of last quarter. That’s almost 30 per cent of the total market and makes a mockery of the startling growth figures regularly released by the country’s mobile operators. There also seems to have been some sort of unofficial contest for India to surpass the China numbers and claim the title as the world’s largest telco market, in subscriber number terms.

Rethink-wireless.com reports that the reassessment of active numbers has been prompted by rule changes in India - prepaid users (the vast bulk of the customer base) used to be classed as inactive if they did not recharge their cards or make a call within 180 days, but that has now been reduced to just 20 days. Mandatory SIM registration has also been introduced.

As a result of the changes, that other, largely mythical figure, ARPU, should now see dramatic improvement for Indian operators. So it seems every cloud may have a silver lining, right? Well, maybe not, as it will depend if the marketers or the accountants get their way. The press seems to like big subscriber numbers, the investors – big ARPU numbers, and in a country with some of the world’s smallest ARPU figures, the latter should be preferable, surely. No doubt, some egos will be frayed in the process.

The Insider has constantly questioned the value of ARPU figures as a sensible means of comparing CSPs in national and cross-national markets. This latest news form India highlights the point that unless all countries have the same conditions for inactive SIM life, subscriber detail collection and a clear definition of what an active SIM actually is then it will remain non-sensical.

Tie this into the fact that predominant pre-paid customers in emerging markets appear to care less about retaining a phone number than getting cheaper calls. Not so long ago, in Indonesia for example, it was better value to obtain a new SIM with an opening balance, than to top-up an existing one. No need to explain the preference of customers and the effect it had, not only on ARPUs, but the cost of supplying millions of SIMs that were discarded as soon as their value was consumed. Yet another great marketing exercise?

In Thailand, interconnect concessions with the state-owned TOT were determined partially on subscriber numbers, the more the better. Therefore, there was a tendency to never retire inactive SIMs and mobile operators were reporting remarkably high subscriber figures, and a subsequent, artificially low ARPU.

The advantages of quoting ARPU numbers over the more credible AMPU (average margin per user) and EBITDA figures has been well documented by many writers over the years. ARPU is quick and easy to calculate and the lowliest clerk can simply take the gross revenues at month end and divide it by the number of subscribers, supposedly active.

If we continue on relying on these ‘mythical’ ARPU figures to compare operator performance then we will have to establish an international standard to level the playing ground, including what an active subscriber actually is. Only then will we be able to see who is winning the subscriber race and who wins the best and worst ARPU titles, taking foreign exchange variations into consideration, of course.