High telephony spread may lead to churn

The high mobile telephony penetration in India's major metros and cities is expected to lead to a dramatic churn in the space. Six new players are entering the mobile space in a few months and telcos may drop tariffs to woo more customers.

T V Ramachandran, who heads the Cellular Operators Association of India (COAI) representing the GSM lobby, said, "The churn in the major cities currently stands at around 8-9 per cent, which is on the higher side. The entry of additional players, following the awarding of spectrum, will result in an increase in competition. With operators competing with each other, the percentage of churn is slated to increase further."

Telcos admit that the churn is very high already. "Churning is high in markets where there is a high penetration of customers, as in Delhi and Mumbai. This is evident from the fact that gross subscriber additions registered by operators are higher in areas with high tele-density compared with the 'B' and 'C' circles in the country," BPL Mobile CEO S Subramaniam said.

A telecom company needs to add over 1-1.5 lakh subscribers to register a net addition of around 70,000-80,000 users, he said. However, the churn is happening with the new subscribers who mainly use the mobile phone for outgoing calls. These are people to whom retaining the same number is not that important.

The reason for the churn is also the high level of penetration in various cities, which forces the telcos to woo existing customers as anyone with some surplus has already bought a mobile connection. Chennai tops tele-density with over 80 per cent, Mumbai and Delhi stand around 70 per cent each and Kolkata, 45 per cent. Bangalore leads mobile telephony penetration among tier-I cities with 45 per cent, while Pune and Hyderabad stand around 30 per cent each.

"The telecom companies are getting aggressive and launching newer and novel schemes to attract more customers. New schemes such as the 50 paise for a local call, reduction of SMS charges and rolling out of value-added services (VAS) are an indication of service providers undercutting existing operators," an analyst, who did not want to be identified, said.