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Cellular operators entangled in price war

By Muhammad Yasir

KARACHI: The falling call rates must be good news for mobile phone users but it is really a big challenge for the operators who are struggling hard to fix the dwindling Average Revenue Per User (ARPU), which has almost dropped 35 percent in the current financial year.

In the unabated price war in the cellular phone sector, the companies have strained every nerve to compete each other attracting as many customers to their network as they can as recently four of the five operators one after another have reduced their calling rates through introduction of various packages.

These companies have recently reduced their calling rates up to 65 paisas on per 30 seconds or a minute from the previous Re 1 per 30 seconds or a minute, which may also narrow down their ARPU per month if the customers will not increase their cellular service usages.

It is not the competition that has forced the market players of cellular phone sector to reduce their rates. But the calling traffic have been decelerated by the high taxes on the mobile phone services, eroding the affordability of a large number of customers, who became carefree of mobile usage. Besides, the prevailing high inflation has aggravated more burdens on the lower-class customers, who tended to decrease their calling habits.

Earlier, almost all cellular phone operators have reduced their rates to nearly Re 1 per 30 second from Rs 1.25 per half minute, it was learnt.

“The calling traffic has declined more than 30 percent among the customers’ base at the end of first quarter of current fiscal year 2008-09, which pushed up companies to drop their calling and SMS charges in order to revive consumption trends among the customers,” an official of mobile phone company told on condition of anonymity.

“Reduction in calling charges coupled with free minutes’ packages have again boosted up the utilisation of mobile services among the customers and stopped the free fall of ARPU/m,” another official of the cellular firm explained.

The monthly ARPU is measured in dollar so the rupee devaluation has an impact on it adversely. So far, the rupee has depreciated more than 15 percent against the greenback in the current fiscal year that has shrunk the repatriated profit of the companies. Officials of the cellular firms told the operational cost of the companies have increased steeply in the country, particularly last year, as they run a large number of signal transmission sites on their own power generation during the long power outage period.

The companies had levied 5 percent services tax in September 2008 on the balance recharge through pre-paid card or cash load in an effort to consummate their increasing cost operations, they added. Customers, who already have been paying 21 percent GST with 10 percent withholding tax, have been overwhelmed by the mounting load of charges. Therefore, the mobile phone operators have done expeditious downward revision of their calling and SMS (Short Messaging Service) following the significant decline of their services. This is the second time that companies have reduced calling rates sharply in the current fiscal year. This move will attract customers to increase their mobile usage because their subscribers growth will affect in the coming months after the introduction of new system of SIM verification in the country, an official of mobile phone companies told on the condition of anonymity.

He said cellular firms’ market has saturated already as the growth of subscribers has almost been flat in the recent months, therefore, the market players are focusing on their existing users and have reduced their rates.

According to Pakistan Telecom Authority’s (PTA) statistics the cellular firms have added only 0.581 million connections on their network in the 1HFY09 as against massive subscriber growth of 11.2 million in 1HFY08. As a matter of fact that a large number of unverified and unregistered SIMs have been blocked by operators in this period abiding by PTA and Ministry of Interior directives, more than 11 million SIMs have been blocked in this regard.

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