Delhi cellular operators Bharti Cellular and Essar Cellphone have together been estimated to have run-up losses in excess of Rs 50 crore ($12.72 million) accruing from unpaid bills in two years of operation. The unpaid bills have pushed back plans by the two companies to wipe out their accumulated losses this financial year.
Laments Sunil Bharti Mittal, chairman and managing director of Bharti Enterprises, the groups holding company: The default rates (in payments of bills) in advanced networks like in UK is 3.5 per cent. We had budgetted a 5-6 per cent non-payment of bills, but find that we are ending up with 8-9 per cent.
Mittal admits that his company is going to write off Rs 20 crore this financial year. Rival Essar Cellphone, industry sources say, has a higher number of unpaid bills. Essar executives were not available to confirm projected write-offs to the tune of Rs 30-35 crore.
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Numbers apart, both Bharti Cellular and Essar Cellphone have burnt their fingers badly and have only themselves to blame. Explains a senior industry source: Typically, a subscriber applies under a fictitious name and address. The marketing people in their zeal to add up the number of cellphones sold, dont care to conduct adequate credit checks on the subscriber.
The result: unscrupulous elements pick up cellphones and after running up huge bills (often running into lakhs), just vanish. Alarm bells start ringing when the subscriber does not turn up even after the mandatory payment period of 21 days.
When the credit recovery people go to collect payments, they find that no person under the registered name lives at the address given, said the source.
Besides sharing information on defaulting subscribers, it is not surprising that both Bharti Cellular and Essar Cellphone are adopting a strict stance with regard to bill payments by customers. Says Mittal: Our billing cycle is 30 days. We have a payment period of exactly 21 days, after which we take the (non-paying) subscriber off the system.
Another source said: Cellphone users have to realise that they have to pay the bills in time. If you default on your electricity or telephone bills, your electric supply will be cut. The same will happen with cellphones.
One of the offshoots of this get-strict, shore-up-your-bottomline policy has been that both Bharti Cellular and Essar Cellphone have stagnated with regards to the number of new subscribers being added to their networks. Bharti Cellular, which crossed the 1,00,000 mark four-and-a-half months ago is still at some 1,10,000.
Both the Delhi operators hope to emulate the success of Ace, a prepaid card scheme of Hutchison Max, a Mumbai cellular operator. The card, which is available in several denominations and in a rechargable version, has been a hit among Mumbai subscribers with as many as 7,000 selling a month initially.
Since payments are made upfront, prepaid cards completely rule out defaults on bills and also allow operators to earn interest on such payments. Prepaid cards enable subscribers to keep a tab on usage of the cellphone. According to cellular operators, another advantage perhaps unique to India of the prepaid card is that subscribers can pay for it in cash, rather than cheque payments in the case of bills.