COAI guidelines for Operators on Subscriber Base

COAI has recently issued some guidelines that is expected to help cellular operators in issuing more accurate figures regarding their subscriber base. Although these guidelines are not binding analysts point out that with the market maturing rapidly operators will by and large abide by these norms. Besides, adds another Delhi-based telecom consultant "there is nothing to beat the peer pressure which will ensure that operators follow the
norms."

Reporting cellular subscriber base has been a subject of speculation for sometime now since the valuation of a cellular service provider is dependent on its subscriber base and becomes a major issue in the event of a take-over. The acquisition price is directly proportional to the size of the subscriber base with the rate ranging between $ 500 to $ 2000 per subscriber. Apart from acquisitions cellular companies routinely inflate subscriber number in the "game of one upmanship". Operators are also accused of inflating numbers just before raising funds.

According to the guidelines, COAI has asked members not to account for various categories of users. The most significant category being suspended users. The major issue in accounting norms was the issue of pre-paid customers since different operators used different cut-off periods to check whether the pre-paid customers have exited their service.

The other set of disputed subscribers is customers who have churned out after the suspension period. Says Rothin Bhattacharya, Executive Director, Telecom, KPMG Consulting, "There is a 2-3 percent churn in the subscriber base of operators. If operators are not careful about this percentage, the estimates can go widely wrong. Particularly when the given bases are huge the small margin can skew the figures drastically."

In addition, COAI has issued guidelines not to include test/service cards given to national and international operators to test automatic roaming; mobile numbers used by employees, mobile numbers available with operators and the distribution channels and roaming subscribers who would already be the network of the home operator.

Says T V Ramachandran, Director General of COAI, "We issued these guidelines in September and operators have followed the guidelines in the last two months. In fact there has been no serious discrepancy in reporting numbers since the subscriber base of cellular users in both September and October also grew by nearly 2.5 lakh which was the same in August as well."

Inaccurate reporting of subscriber bases impacts the industry adversely since many acquirers have burnt their figures recently when taking over due to inflated subscriber bases. According to industry sources, one acquirer found the subscriber base to be as inflated as 35,000. In most cases of acquisition, subscriber figures are found to be inflated by as much as 10,000. As has happened in the case of a leading operator who had acquired several circles, the sharp drop in subscriber base of the acquired circle soon after the take-over revealed that the base was actually much inflated.

However experts opine that the market has matured a lot since the early days and with only the more serious players left in the fray, possibilities of inflated subscriber bases have become that much more remote. Experts also opine that the natural check and balance system in the market wherein operators keep a tab on the subscriber base of its competitors is an effective deterrent for operators to cite accurate subscriber numbers.

(CNS)